The answer to that question may depend on the specifics of your situation, but we can look at it broadly.
To start with, we need to understand that credit scores are calculated based on a scale of 350 to 850, and higher numbers are always better. The scores are formally known as FICO scores. Each of the three credit bureaus – TransUnion, Experian, and Equifax – may calculate them slightly differently. Therefore, you need to look at credit reports from all three to see how creditors look at you.
Generally, anything over 760 qualifies you for the best interest rates on mortgages. Scores in the 700’s put you in a good position, while scores in the high 600’s are still acceptable. Scores under 620 are considered to be a poor credit risk.
So, there are three main categories: above 760, 620-760, and below 620.
In the 620 to 760 category, there are still variations. You will probably be able to qualify for credit, but there is a penalty for lower score. For instance, under one scenario, someone with a 750 qualified for a $300,000 mortgage for $1773 while that same mortgage would be $1988 for someone with a 630. That’s a difference of $215 a month – or more than $75,000 over the life of a 30 year loan.
So, even in this “good to acceptable” credit range, improving your credit score can have a dramatic effect on your financial situation.
But, when your credit score is below 620, you really need to work on your credit report outlook. That’s because you might not be able to get a mortgage at all, and any credit you do qualify for will come at a high interest rate premium.