credit-score-ranges-explained): How Your Score Affects Rates, Approval, and Loan Options

Your credit score is one of the most powerful factors in your mortgage application. It influences not just whether you get approved, but what interest rate you'll pay, how much you need for a down payment, and which loan programs are available to you.

Mortgage lenders don't just look at your score as a single number — they categorize it into tiers, and each tier comes with significantly different terms. Understanding these tiers gives you the knowledge to either improve your position before applying or set realistic expectations for your current situation.

How Mortgage Credit Scoring Works in 2026

Before diving into the tiers, it's important to understand which credit score mortgage lenders actually use.

FICO Score 10T

As of 2026, most mortgage lenders use FICO Score 10T, which incorporates trended credit data — meaning it looks at your credit behavior over time, not just a snapshot. This model considers:

Whether your balances are trending up or down
Your payment patterns over 24+ months
How you manage revolving credit over time

This is different from the free credit scores you see on banking apps, which typically use FICO 8 or VantageScore. Your mortgage score may be 20 to 40 points different from what you see online.

Tri-Merge Credit Report

Lenders pull reports from all three bureaus (Experian, TransUnion, Equifax) and typically use the middle score. If your scores are 720, 735, and 740, your qualifying score is 735. For joint applications, lenders use the lower of the two borrowers' middle scores.

The Credit Score Tiers

Tier 1: Exceptional (760+)

This is the gold standard. Borrowers in this tier receive:

The lowest available interest rates — often 0.5% to 0.75% below average rates
Best loan terms across all programs
Lowest [private mortgage insurance](/blog/mortgage-insurance-pmi-guide) (PMI) premiums if putting less than 20% down
Maximum negotiating leverage with lenders
Approval for virtually all loan programs

At this level, lenders compete for your business. You're a low-risk borrower, and the savings over the life of your loan are substantial. On a $400,000 mortgage, the rate advantage of a 760+ score versus a 680 score can save $50,000 to $100,000 in total interest.

Tier 2: Very Good (720–759)

Still excellent territory with near-optimal terms:

Rates slightly above the best — typically 0.125% to 0.25% higher than the 760+ tier
Excellent loan options — conventional, FHA, VA, jumbo
Low PMI rates — only marginally higher than the top tier
Strong approval odds for most property types and loan amounts

The difference between this tier and Tier 1 is relatively small. If you're at 720, you're in great shape. If you're at 750, it may be worth a short delay to push above 760 for the best rates.

Tier 3: Good (680–719)

This is where most American borrowers fall, and the terms are still competitive:

Moderate rate premium — typically 0.25% to 0.5% above the best rates
Full access to conventional loans with standard terms
Higher PMI costs — noticeably more than Tier 1 and 2
FHA and VA loans available with good terms
Some jumbo lenders may add restrictions or rate adjustments

At a 680 score, you'll pay more than someone at 760, but you still have access to mainstream mortgage products. The monthly payment difference on a $350,000 loan might be $75 to $150 per month.

Tier 4: Fair (620–679)

This tier introduces more limitations and higher costs:

Significant rate increases — 0.5% to 1.5% above the best rates
Higher down payment requirements for conventional loans
Substantially higher PMI premiums
FHA loans become more attractive at this level due to more lenient credit requirements
Some conventional lenders may decline or impose overlays (additional requirements beyond the standard)
Limited jumbo loan options

Borrowers in this range should seriously consider FHA loans, which are designed for borrowers with lower credit scores. The tradeoff is mortgage insurance for the life of the loan (unless you refinance later).

Tier 5: Subprime (580–619)

Options narrow considerably, but homeownership is still possible:

FHA loans — available with a minimum 580 score and 3.5% down payment
Higher [FHA mortgage insurance](/blog/fha-loan-requirements-2026) premiums
Limited conventional options — minimum 620 for most conventional lenders
Interest rates 1.5% to 2.5%+ above best rates
Manual underwriting may be required — a human reviews your file instead of automated approval
VA loans may still be available for eligible veterans (no minimum score requirement from the VA, though lenders set their own minimums)

Tier 6: Deep Subprime (Below 580)

Mortgage options are very limited but not zero:

FHA loans with 500–579 score require 10% down payment minimum
VA loans — some VA lenders work with scores in the 500s
USDA loans — technically no minimum, but most lenders want 640+
Non-QM loans — alternative lending products for borrowers who don't fit traditional boxes
Interest rates are significantly elevated
Manual underwriting is standard

If your score is below 580, it's usually worth spending six to twelve months improving your credit before applying. The rate savings alone will far exceed the cost of waiting.

How Credit Score Tiers Affect Specific Loan Types

Conventional Loans (Fannie Mae/Freddie Mac)

Credit Score	Down Payment	PMI (Approximate)	Rate Impact
760+	3%–20%+	Lowest	Best rates
740–759	3%–20%+	Low	+0.125%
720–739	3%–20%+	Moderate	+0.25%
700–719	5%–20%+	Higher	+0.375%
680–699	5%–20%+	High	+0.5%
660–679	5%–20%+	Very high	+0.75%
640–659	10%–20%+	Very high	+1.0%+
620–639	10%–20%+	Highest	+1.5%+

FHA Loans

580+ — 3.5% down payment, standard MIP rates
500–579 — 10% down payment required
Below 500 — not eligible for FHA

FHA mortgage insurance is the same regardless of credit score: 1.75% upfront and 0.55% annually for most loans. This makes FHA particularly attractive for borrowers in the 580–680 range.

VA Loans

No official minimum from the VA
Most lenders require 580–620 minimum
No PMI regardless of credit score — a major VA benefit
Funding fee varies by down payment and usage, not credit score

Jumbo Loans

Most require 700+ minimum — some want 720+
Higher scores get meaningfully better rates on large loan amounts
The rate spread between tiers is amplified because loan amounts are larger

For more on how scores translate to actual rates, see our detailed guide on [[mortgage rates by credit score](/blog/mortgage-rates-by-credit-score)](/blog/mortgage-rates-by-credit-score).

The Real Dollar Impact of Credit Score Tiers

Let's put real numbers on a $400,000, 30-year fixed mortgage:

Credit Score	Estimated Rate	Monthly Payment	Total Interest Paid
760+	6.0%	$2,398	$463,353
720–759	6.25%	$2,463	$486,558
680–719	6.5%	$2,528	$510,026
640–679	7.0%	$2,661	$558,036
620–639	7.5%	$2,797	$607,200

The difference between a 760 score and a 620 score on this loan is $399 per month and $143,847 in total interest over 30 years.

How to Improve Your Credit Score Tier

Quick Wins (1–3 Months)

Pay down credit card balances to below 30% utilization (below 10% is ideal)
Dispute errors on your credit report — about 25% of reports contain mistakes
Become an authorized user on a family member's old, low-balance credit card
Don't close old accounts — length of credit history matters

Medium-Term Strategies (3–6 Months)

Make all payments on time — payment history is 35% of your score
Reduce overall debt — focus on revolving debt first
Avoid new credit applications — each hard inquiry can drop your score 5–10 points
Consider a credit-builder loan if you have thin credit

Long-Term Approach (6–12 Months)

Diversify credit types — installment loans, revolving credit, and mortgage history all help
Maintain low utilization consistently
Let negative items age — their impact decreases over time

For more detailed strategies, check our guides on reaching a 700 credit score and achieving an 800 credit score.

Credit Score Tier Strategies for Different Borrowers

First-Time Buyers

If you're at 680, consider whether waiting three to six months to reach 720 would save enough in interest to justify the delay. In rising home price markets, the answer may be no. In stable markets, the rate savings often outweigh the wait.

Self-Employed Borrowers

Lenders already scrutinize self-employed income more heavily. A higher credit score offsets some of that risk in the underwriter's eyes. Aim for 720+ if possible. See our [[mortgage for freelancers](/blog/mortgage-for-freelancers) guide](/blog/mortgage-for-freelancers) for more tips.

Refinancers

If you're refinancing after bankruptcy or after divorce, your credit score tier determines how quickly you can access competitive rates again.

Investment Property Buyers

Most lenders add 0.5% to 0.75% to [investment property rates](/blog/dscr-loan-interest-rates-explained) on top of credit-tier pricing. A high credit score is especially valuable for investment purchases. Learn more in our [[refinance investment property](/blog/dscr-loan-refinance-guide) guide](/blog/refinance-investment-property-guide).

Final Thoughts

Your credit score tier is not your destiny — it's your starting point. Understanding where you fall and what each tier means empowers you to either take action to improve your position or move forward with realistic expectations.

The most important takeaway: small score improvements near tier boundaries can save thousands. If you're at 715, pushing to 720 might lower your rate. At 755, reaching 760 unlocks the best available terms.

Before applying for a mortgage, check your actual FICO score (not VantageScore), understand which tier you're in, and make a strategic decision about whether to apply now or improve your position first. Use our mortgage preapproval checklist when you're ready to take the next step.

[Credit Repair Timeline](/blog/credit-repair-timeline)

Mortgage Credit Score Tiers

Key Takeaways