Credit & Mortgage Guide for Washington State Homebuyers & Homeowners

Your credit score is one of the first things a mortgage lender looks at — and it affects more than just your approval odds. It influences your interest rate, your loan program options, and how your application is evaluated overall. For conventional loans, both Fannie Mae and Freddie Mac have removed the score floor from their automated underwriting systems, meaning a low score no longer automatically disqualifies you — but your score still has a direct impact on the rate and costs you’re offered. The good news: with the right information and a little lead time, most buyers can put themselves in a strong position before they ever apply.

This guide covers everything you need to know about credit and mortgages — from how scores are calculated to what you should (and shouldn’t) do before applying.

How Mortgage Credit Scores Work

Mortgage lenders pull your credit from all three bureaus — Equifax, Experian, and TransUnion — and use the middle score of the three for each borrower. If there are two borrowers on the loan, lenders use the lower of the two middle scores for both underwriting and pricing.

So if one borrower has a middle score of 760 and the other has 704, the loan is priced as a 704. This is one of the most important things couples and co-borrowers need to understand before applying.

Your Online Score Is Not Your Mortgage Score

The score you see through Credit Karma, your bank app, or most free monitoring services is almost always different from what a mortgage lender will use. Mortgage lenders use older FICO scoring models — FICO 2, FICO 4, and FICO 5 — that are specific to mortgage lending and can produce meaningfully different numbers than the VantageScore or newer FICO versions used by consumer tools.

Your mortgage score could be higher or lower than what you see online. Don’t let a number on Credit Karma stop you from having a conversation with a mortgage professional. Learn more about the difference between your online score and your mortgage score →

Minimum Credit Scores by Loan Program

Different mortgage programs handle credit scores differently. For conventional loans, both Fannie Mae and Freddie Mac have removed the minimum score requirement from their automated underwriting systems — but your score still drives pricing. Other programs have their own thresholds and rules.

Loan Program	Minimum Score	Notes
Conventional	No minimum for approval (score required for pricing)	Fannie Mae and Freddie Mac no longer use a score floor for approve/deny — but LLPAs still apply; pricing improves at 680, 700, 720, 740+
FHA	580 (3.5% down) 500 (10% down)	Credit history scrutinized heavily; last 12 months matter most
VA	No official minimum (most lenders: 580–620)	No score-based pricing adjustments — a major VA advantage
USDA	640 (automated) Lower with manual UW	Zero-down program for eligible rural/suburban areas in WA
Non-QM / Portfolio	Varies by lender	Alternative documentation programs; score requirements vary widely

See the full breakdown: What Credit Score Do You Need to Buy a Home in Washington State? →

How Your Credit Score Affects Your Mortgage Rate

Both Fannie Mae and Freddie Mac have removed the minimum credit score requirement from their automated underwriting systems — a significant guideline change that opens the door for buyers who were previously turned away based on score alone. Your credit history is still evaluated, and your score still affects your pricing — but a low score is no longer an automatic disqualifier for a conventional loan. Learn more about how this change may help you →

However, your score still directly affects your rate and costs through Loan-Level Price Adjustments (LLPAs) — fees set by Fannie Mae and Freddie Mac that vary based on your score and down payment. These adjustments are built into your rate or closing costs, not charged separately.

The pattern: the higher your score, the better your pricing. Key thresholds where pricing typically improves are 680, 700, 720, and 740. Crossing one of these tiers — even by a few points — can meaningfully reduce your rate or fees over the life of the loan.

A borrower with a 719 score and 20% down will pay a higher LLPA than a borrower with a 720 score in the same scenario. Six points can make a real difference — even if both borrowers get approved.

How to Improve Your Credit Before Applying

Before you take any action on your credit, talk to your mortgage professional first. Changes that seem helpful — paying off an account, closing an old card — can sometimes lower your score or complicate your qualifying profile. Get guidance specific to your situation before making moves.

That said, here are the most effective levers for improving a mortgage credit score:

Pay Down Revolving Balances (Credit Utilization)

Credit utilization — the percentage of your available revolving credit you’re using — is one of the fastest-moving factors in your score. Key thresholds:

• Being over your credit limit on any card causes the most damage — bring any over-limit account under the limit first
• Balances below 50% of the credit limit per card produce score improvement
• Balances below 30% of the credit limit produce further improvement
• Below 10% is ideal for maximum scoring benefit
• Start with the smallest balances first — the scoring system doesn’t distinguish between a $500 card and a $5,000 card, so paying a small card to 30% has the same impact as paying a large one to 30%

Keep Old Accounts Open and Active

The length of your credit history is a meaningful scoring factor. Closing an old account — even one you rarely use — can temporarily lower your score by reducing your average account age and available credit. Keep older cards active with a small purchase each month (a tank of gas, a grocery run) and pay them off. Inactive accounts can be closed by the issuer, which removes them from your scoring profile.

Review Your Credit Reports for Errors

Errors on credit reports are more common than most people expect — wrong account statuses, balances that don’t reflect payments, even accounts that don’t belong to you. Pull your reports from annualcreditreport.com and review each one. Legitimate disputes can be filed directly with the bureaus.

Important: Do not dispute legitimate debts if you are planning to apply for a mortgage. A dispute flag on an account can cause underwriting complications and may need to be removed before closing — which can actually lower your score temporarily. Talk to your loan officer before disputing anything.

Address Late Payments

FHA loans in particular scrutinize the most recent 12 months of payment history. If you have a recent late payment, the clock starts from the date of that payment — most lenders want 12 months of clean history before proceeding with an FHA loan. This timeline is non-negotiable, but it’s also predictable: you can plan around it.

What NOT to Do Before Applying

The period between starting a mortgage application and closing is not the time to make financial moves. Lenders re-verify credit just before funding — changes discovered at that stage can delay or derail your closing.

• Don’t apply for new credit. New credit applications create hard inquiries that can lower your score and raise questions about new debt obligations.
• Don’t close existing accounts. Closing an account reduces your available credit and can lower your score, even if the account has a zero balance.
• Don’t make large purchases on credit. New balances increase utilization and can affect your debt-to-income ratio.
• Don’t co-sign for someone else’s loan. Co-signed debt counts against your DTI as if it were your own.
• Don’t buy a car. Auto loan payments are one of the most common DTI problems that surface between preapproval and closing.
• Don’t pay off collections without talking to your loan officer first. Paying off an old collection can actually reactivate it on your credit report and temporarily lower your score.

How many times will your credit be pulled during a mortgage transaction? →

Why you should wait to buy furniture until after closing →

Credit Score vs. Credit Report: What’s the Difference?

Your credit score is a three-digit number calculated from the data in your credit report. Your credit report is the underlying record — every account, payment, balance, inquiry, and public record associated with your credit history.

Mortgage lenders care about both. The score is used for pricing and program eligibility. The report is reviewed manually by an underwriter looking for patterns: payment history over the past 12–24 months, collection accounts, judgments, and anything that doesn’t fit the story the score tells.

A borrower with a 640 score and spotless payment history for the past two years is a different risk profile than a borrower with a 640 score and three late payments in the last year — even if their numbers look the same on paper.

Building a Credit Game Plan for Homeownership

If your credit needs work before you’re ready to buy, that’s not a reason to put homeownership off indefinitely — it’s a reason to build a plan with a timeline. In many cases, 6–12 months of focused effort can move someone from “not yet” to “ready to buy.”

A solid credit game plan typically includes:

1. Pull your actual mortgage credit report — not Credit Karma. Have a licensed mortgage professional pull a tri-merge report so you’re working from the same data the lender will see.
2. Identify the highest-impact changes — over-limit accounts, high utilization, recent lates, or thin credit history.
3. Work the utilization levers first — these can move your score in 30–60 days once a new statement cycle closes.
4. Let the 12-month clock run — if you have recent lates, the most important thing you can do is make every payment on time going forward.
5. Build reserves simultaneously — use the time you’re working on credit to also save for down payment and closing costs. The two goals compound each other.
6. Re-check every 90 days — score improvement is incremental. Regular check-ins with your mortgage advisor help you stay on track and catch issues early.

Frequently Asked Questions