What Factors Affect Credit Score When Buying a Home?

Two buyers walk into the same lender with the same income. One pays every bill on time and keeps balances low; the other carries a few high card balances and opened two store cards last month. Their interest rates come back half a percent apart—thousands of dollars over the life of the loan. What happened? The big, confusing villain of home ownership... CREDIT SCORES!

Here’s the clear, well‑researched guide to what actually moves your score when you’re getting a mortgage.

First: Why Do Lenders Care?

Your credit score is like your financial report card. It sums up how well you’ve managed money over time. Lenders use it like a quick snapshot of risk (like how an insurance company will check your driving record before setting a premium).

A higher score signals you’re likely to pay back on time, which earns you better loan terms and lower interest rates.

Which Score Do Mortgage Lenders Use?

Most mortgage lenders still rely on older FICO® models (Classic FICO: FICO 2 / 4 / 5) from the three credit bureaus. Newer versions (like FICO® 10T and VantageScore® 4.0) are being phased in, but the basics of building good credit haven’t changed.

Think of it like a food critic reviewing a restaurant. Different critics may focus on different details, but if the food is good and the service is consistent, you’ll always get strong ratings! In the same way, no matter which scoring model lenders use, paying on time and keeping debt low will give you the best results

Tip: Multiple mortgage inquiries made within a short window are generally treated as one inquiry for scoring purposes. You can (and should) compare lenders.

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The Five Big Factors

1) Payment History (~35%)

What it is: Whether you pay on time. Late payments typically report at 30, 60, 90+ days past due; the later the worse.

Keys For Success:

• Turn on autopay for at least the minimum on every account.

• If you slip, catch up fast. Older lates matter less over time.

• Avoid charge‑offs and collections; these can be severely damaging under the older mortgage models.

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2) Amounts Owed / Utilization (~30%)

What it is: How much of your revolving credit (credit cards/lines) you’re using versus your limits, both overall and per card. Like a glass of water, the fuller it is, the less space is left. Lenders prefer to see plenty of room remaining.

Keys For Success:

• Keep overall utilization below 30% (under 10% is even better for top‑tier scores)

• Avoid any single card spiking near its limit.

• Don’t close cards right before applying, losing available credit can raise utilization.

• If you can, pay card balances before the statement closes so the lower number reports.

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3) Length of Credit History (~15%)

What it is: Average age of accounts and age of your oldest account.

Keys For Success:

• Keep long‑standing cards open (especially those with no fees).

• Avoid opening several new accounts right before a mortgage; new accounts drag your average age down.

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4) New Credit / Inquiries (~10%)

What it is: This factor measures how often you’ve recently applied for new credit accounts. Each new application usually triggers a “hard inquiry” on your report. Lenders see a burst of new applications as a potential red flag.

Why Does It Matter?: Imagine a teacher noticing a student asking for extra pencils again and again. One request is fine, but if it keeps happening, the teacher might question whether the student is prepared. In the same way, lenders may worry if you’re opening lots of new accounts at once.

Keys For Success:

• Bundle mortgage inquiries within a two‑to‑four‑week window when you shop rates.

• Hold off on applying for other new credit (like cards, auto loans, etc.) until after your home closes. I'll repeat, not after you get under contract for a home, but once your home closes.

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5) Credit Mix (~10%)

What Is It?: Credit mix refers to the variety of account types you have (such as credit cards, auto loans, student loans, mortgages, etc).

Why it matters: Lenders want to see that you can manage different kinds of debt responsibly. A healthy mix shows you can handle both short‑term borrowing (like credit cards) and longer, structured payments (like a car loan or mortgage). Like an athlete excelling in both sprinting and long-distance running, a healthy credit mix demonstrates to lenders your versatility in managing different types of debt.

Keys To Success:

• Having a mix helps, but don’t open accounts just for mix. Payment history and low balances carry far more weight.

• If you already have both a card and a loan on record, you’re likely covered

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Items That Hurt More Than People Realize

Item	Why It Matters	Key Takeaway
Collections & charge‑offs	Older mortgage scores can still count paid collections against you...	Even if you pay them, they may still hurt, so address them early.
Medical debt	Credit bureaus removed many medical collections under $500 and federal rules are curbing use of medical bills in credit decisions	Smaller medical debts may not matter as much, but confirm accuracy of larger ones.
Active disputes	Underwriters often require disputes to be resolved/removed before final approval.	Clean these up before applying to avoid delays.
Authorized user (AU) accounts	Being added to a well‑managed, long‑aged card can help, but underwriters may discount AU‑only history.	Good supplement, but build strong accounts in your own name.
Closing cards	Can raise utilization and sometimes nick your score	Avoid closing accounts right before a mortgage.

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Quick Summary of What Factors Affect Your Credit Score When Buying a Home:

• Payment History: Pay on time, always. This is the single most important factor.

• Amounts Owed/Utilization: Keep balances low compared to your credit limits.

• Length of Credit History: The older your accounts, the better.

• New Credit/Inquiries: Too many applications in a short period can hurt you.

• Credit Mix: A variety of account types helps, but only after the basics are covered.

Together, these five elements form the backbone of your credit score. Focus on them consistently, and you’ll build the foundation lenders want to see.

Action for Homebuyers?

Now that you know what factors affect credit score, what should you do as a future home owner? If you remember only three things: never pay late, keep utilization low, and avoid new credit in the run‑up to your mortgage. Those three behaviors carry across old and new scoring models and put you in position for the best rate.

Buying in Milwaukee soon? I’ll help you build a quick score‑ready game plan and connect you with local lenders who price competitively. Reach out and let’s map it out.