Myth vs. reality: How credit scores can affect homebuyers

Debunking myths surrounding credit scores and how they factor into buying a home

A person holding a phone showing a credit score app

Published on

February 29, 2024


In this article:

For homebuyers, credit scores are a crucial piece of the home-buying journey, determining not just their eligibility for a mortgage, but also the terms and conditions they'll encounter along the way.

Lenders look at credit scores to assess the risk of lending to potential buyers. Your credit score will not only impact whether you get approved for a mortgage, but other details like the interest rate, down payment requirement, and eligibility for different types of loans. 

Unfortunately, there are some misconceptions surrounding credit scores and how they factor into buying a home. 

Myth 1: You need a high credit score to get mortgage approval

Reality: While a high credit score is advantageous, it’s not a prerequisite for mortgage approval. 

Lenders consider various factors beyond credit scores, such as income, employment history, and debt-to-income ratio. Buyers with less-than-perfect credit scores can still qualify for mortgages through alternative loan options or by providing a larger down payment.

When applying for a conventional loan, it is recommended that you have a credit score of at least 620. 

Myth 2: Checking my credit score hurts it

Reality: Contrary to popular belief, checking your own credit score—known as a soft inquiry—does not impact your credit score. Monitoring your credit score regularly is essential for identifying errors or fraudulent activity. However, multiple hard inquiries from applying for credit simultaneously may have a minor, temporary impact on your score.

Myth 3: Closing unused credit accounts improves credit score

Reality: Closing unused credit accounts can potentially harm your credit score. It may reduce your available credit and increase your credit utilization ratio, both of which can negatively impact your score. Instead of closing accounts, consider keeping them open to maintain a longer credit history and improve your credit utilization ratio.

Myth 4: Paying off debts will boost my credit score

Reality: This is both true and false. Paying off credit card debt will help your credit score. But prematurely paying off installment debt like a mortgage or student loans will not be as beneficial and may ding your score. You won’t see a score bump from paying off a car loan early, for example, and it could ding your score because it will mean having fewer credit accounts.

In general, if you are getting ready to apply for a mortgage and want to find ways to boost your score, it’s not wise to expect an immediate and substantial improvement from paying off debt. Positive changes to your credit score often take time to reflect, as credit reporting agencies update your credit report periodically.

Myth 5: Credit scores are the sole determinant of mortgage approval

Reality: While credit scores play a significant role in mortgage approval, lenders consider multiple factors when evaluating a borrower's creditworthiness. Employment history, income stability, and debt-to-income ratio are equally important considerations. Buyers with lower credit scores may still qualify for mortgages by demonstrating strong financial stability in other areas.


By dispelling common misconceptions, buyers can approach the home purchasing process with confidence and clarity. As a trusted real estate closing attorney, my goal is to provide clients with the knowledge they need to make informed decisions and achieve successful home purchases.

About the author

Pederson Real Estate Law

Pederson Real Estate Law is a boutique law firm based in Greenwich, Connecticut. We provide experienced, efficient legal services for clients in residential real estate closings —purchases, sales, and refinances.