How Credit Scores Affect Your Mortgage Rate

When it comes to buying a home, your credit score is more than just a number—it’s one of the most important factors in determining your mortgage interest rate. Even a small difference in your score can cost (or save) you thousands of pesos or dollars over the life of a loan.

Let’s break down how it all works and what you can do to get the best rate possible.

What Is a Credit Score?

Your credit score is a three-digit number that tells lenders how likely you are to repay your debts on time. It ranges from 300 to 850, with higher scores considered lower risk.

Here’s a general breakdown:

Score Range	Rating
800–850	Excellent
740–799	Very Good
670–739	Good
580–669	Fair
Below 580	Poor

How Credit Score Affects Your Mortgage Rate

Lenders use your credit score to determine your interest rate—the cost of borrowing money.

Example (Conventional Loan):

• 760+ score → 6.50% rate

• 680 score → 7.25% rate

• 620 score → 8.10% rate

On a ₱5,000,000 loan, the difference between a 6.5% and 8.1% rate could mean paying over ₱1 million more in interest over 30 years!

Why Lenders Care

Credit scores predict how risky it is to lend to you. A higher score means:

• You’re more likely to make on-time payments

• You’re less likely to default on the loan

This gives lenders confidence to offer lower interest rates and better terms

Minimum Credit Score Requirements (2025)

Loan Type	Minimum Score
Conventional	620
FHA	580 (3.5% down) or 500 (with 10% down)
VA	No official minimum, but most lenders prefer 620+
USDA	640+ preferred

Note: These are general guidelines—actual lender requirements may vary.

How to Improve Your Credit Before Buying

Want a better rate? Start working on your credit score before applying for a mortgage:

1. Pay all bills on time – Payment history is the biggest factor (35%)

2. Keep credit balances low – Use less than 30% of your available credit

3. Don’t open new credit lines right before applying

4. Dispute errors on your credit report

5. Avoid closing old accounts (length of credit history helps!)

The Bottom Line

Your credit score doesn’t just affect whether you qualify for a loan—it directly impacts your monthly payment, interest paid over time, and overall affordability.

Even a 20–30 point improvement could save you thousands.

Final Tip

📩 Before house hunting, get pre-approved and ask your lender to walk you through how your score is influencing your rate. If there’s room to improve, a little planning now could mean big savings later.