Credit Scores & Buying a Home in 2025
What You Need to Know Before You Buy
Moving to a new home is a major life decision and your credit score often plays a starring role in how smooth or stressful that process is. Whether you’re renting, buying with a mortgage, or even just getting utilities turned on, your credit history is constantly being affect which can open doors or create unexpected roadblocks. Let’s break down exactly how credit scores impact the moving process, when they don’t matter, and what your options are if you’re still working on your financial comeback.
If you’re planning to buy a home, your credit score is one of the first things lenders look at to determine if you qualify—and what your interest rate will be.
- Conventional Loans: These usually require a credit score of 620 or higher, but to get the best rates, you’ll want a score above 740. Lower scores may mean higher interest rates or a larger down payment.
- FHA Loans: Designed for first-time buyers, these can be more forgiving. You can qualify with a score as low as 500, but you’ll need a 10% down payment. If your score is 580 or higher, that drops to 3.5% down.
- VA Loans: For veterans and active military members, credit score requirements vary by lender, but many accept scores as low as 580 to 620.
- USDA Loans: These zero-down loans for rural properties typically require a 640 credit score, though exceptions can be made with strong compensating factors.
Heads up: Even if your score technically qualifies, it still affects your monthly payment. A higher score usually means a lower interest rate, which could save you tens of thousands of dollars over the life of your loan.
When to Start Repairing Your Credit
The best time to start repairing your credit is at least six months before you plan to apply for a mortgage. This gives your score time to respond to changes like:
- Paying down credit cards (aim for under 30% utilization, ideally under 10%)
- Disputing errors on your credit report
- Paying bills on time consistently
A year or more ahead is even better because it gives you time to build habits and see longer-term results.
Don’t Make Major Purchases Before Closing
Once you’re under contract on a home, don’t open new credit lines or make big purchases like a car or furniture. This can change your debt-to-income ratio or credit score, and it could even cause your mortgage approval to fall through at the last minute. Wait until after closing to furnish your new place.
Unfair Practices to Watch Out For
If you have bad credit, you’re more vulnerable to predatory behavior. Be cautious of:
- Buy Here, Pay Here mortgage scams that overcharge on interest or hide fees
- Rent-to-own agreements that look like homeownership but don’t build equity
- High upfront fees from companies promising to "fix your credit fast"
Always read the fine print and trust your instincts. If it feels shady, it probably is.
Options for Buyers with Bad Credit
Don’t let a low score stop you from exploring your options. You might still qualify for:
- FHA loans, as mentioned above
- Down payment assistance programs
- Credit unions or community development financial institutions (CDFIs)
- Co-signers or joint applications with someone who has better credit
- Rent-to-own with a clear path to ownership (but vet these carefully)
You can also work with a Realtor who understands your situation and connects you with a lender experienced in creative financing or first-time buyer programs.
Final Thoughts
Credit scores are important—but they’re not everything. With preparation, the right guidance, and a little patience, you can make your move with confidence. Whether you’re rebuilding your credit, buying your first home, or exploring creative paths to ownership, you have more power than you think.
And remember: credit can be repaired, but bad contracts are harder to escape. Take your time, ask questions, and build a team you trust.