How a Credit Score Shapes Your Loan Offer

A credit score shapes a loan offer in two ways: it decides whether you qualify under a lender's or investor's rules, and it sets your price through risk-based pricing, where lower score bands carry higher fees or rates. How much it matters depends on the loan type and, on a mortgage, on your down payment.

Key takeaways

In the January 28, 2026 edition of Fannie Mae's price grid, a purchase loan at 75.01–80% loan-to-value carried a 0.875% fee at a 740–759 score and 1.750% at 680–699: $3,062.50 versus $6,125 on $350,000. Check the current grid, reissued September 30, 2026.
At 60% loan-to-value or less, that grid charged 0% at every score band except 639 and below, so a large down payment can matter more than a better score.
A 0.5-point rate gap on a $350,000, 30-year loan (7.40% versus 7.90%) costs about $120 a month and $43,376 in interest over the full term.
FHA allows maximum financing (a 3.5% down payment on a purchase) at a minimum decision score of 580, caps the loan at 90% of value from 500 to 579, and won't insure loans below 500.

What a lender's score actually is

A credit score is a number calculated from one of your credit reports at Equifax, Experian or TransUnion. Lenders choose the model and version, so you have many scores. According to myFICO's list of score versions, the base FICO Scores are FICO 8, 9, 10 and 10T, with FICO 8 the most widely used. Mortgage lenders have long used older versions (FICO Scores 2, 4 and 5, one per bureau). Base scores run from 300 to 850, and auto and bankcard industry scores from 250 to 900.

FICO 9 ignores paid third-party collections, and FICO 10T adds trended data, looking at 24 months or more of balances to see whether they are rising or falling.

Both model owners publish how much each group of factors matters. Their categories don't map one to one, so the table pairs each FICO category with its closest VantageScore 4.0 counterpart:

FICO category	Weight	Closest VantageScore 4.0 category	Weight
Payment history	35%	Payment history	41%
Amounts owed	30%	Credit utilization / balances / available credit	20% / 6% / 2%
Length of credit history	15%	Depth of credit (age and mix)	20%
New credit	10%	Recent credit	11%
Credit mix	10%	Counted within depth of credit	—

The weights come from myFICO, which says they vary by person, and VantageScore's guide. FICO also lists what its scores leave out: salary, job and employment history, age, where you live, the interest rates on your accounts, and your own checks of your credit. Lenders weigh income separately, for example through a debt-to-income ratio.

How risk-based pricing works

Risk-based pricing means a lender sorts approved applicants into price tiers using the credit report and score, plus factors such as down payment and loan type, so a lower tier pays more for the same loan. Federal law requires lenders to tell you. Under Regulation V, 12 CFR 1022.72, a lender that uses a consumer report to grant personal, family or household credit on terms materially less favorable than the best terms it gives a substantial proportion of its customers must send a risk-based pricing notice. Under 12 CFR 1022.73, the notice must show any score used, its possible range and up to four key factors that hurt it (five if inquiries are one), and tell you that you can get a free copy of the report within 60 days.

Many lenders instead use an exception in 12 CFR 1022.74 and give every applicant a credit score disclosure showing how the score compares with other consumers'. If you are turned down, an adverse action notice replaces the pricing notice.

Mortgages: the price grid by score

Fannie Mae and Freddie Mac, which buy conventional mortgages from lenders, charge upfront fees called loan-level price adjustments (LLPAs). Fannie Mae's LLPA Matrix sets them as a percentage of the loan amount, crossing the borrower's "representative" credit score with the loan-to-value ratio (LTV, the loan as a share of the home's value). The fees are charged to the lender, stack with others for features such as investment properties, and are typically passed on as points or a higher rate.

Selected cells for purchase loans with terms over 15 years, as printed in the January 28, 2026 edition. The matrix was reissued on September 30, 2026, and these cells could not be checked against the new copy, so confirm them in the current matrix:

Credit score	30.01–60% LTV	70.01–75% LTV	75.01–80% LTV	90.01–95% LTV
780 and above	0.000%	0.000%	0.375%	0.250%
740–759	0.000%	0.375%	0.875%	0.625%
700–719	0.000%	0.875%	1.375%	1.125%
680–699	0.000%	1.125%	1.750%	1.375%
640–659	0.000%	1.500%	2.250%	1.875%
639 and below	0.125%	2.125%	2.750%	2.250%

The score barely matters at low LTV. Fees are lower at 90.01–95% than at 75.01–80%, but that doesn't make a small down payment cheaper: Fannie Mae's mortgage insurance coverage table starts at 80.01% LTV, and that insurance is priced separately. On September 30, 2026, Fannie Mae and Freddie Mac adjusted their upfront fees so the same pricing applies whether the lender uses Classic FICO (the older mortgage versions) or VantageScore 4.0.

Worked example: 740 versus 680

Illustrative example, using the January 2026 matrix: a $350,000 purchase loan on a $437,500 home (80% LTV), single-family, owner-occupied, 30-year fixed.

LLPA in dollars = loan amount × LLPA percentage

740–759:  $350,000 × 0.875% = $3,062.50
680–699:  $350,000 × 1.750% = $6,125.00
Difference                  = $3,062.50

If the lender builds that gap into the rate instead, the conversion depends on its pricing and on how long it expects the loan to last. Assume a 7.40% base rate and treat the fee and the extra interest as equal in present value at that rate. If the loan is repaid after seven years, each 1% of the loan equals about 0.19 point of rate, so the 0.875% gap becomes roughly 0.17 point, or about $40 a month here. Over the full 30 years, the same fee would equal only about 0.09 point.

So, measured in present value at 7.40%, the rate route costs less if you sell or refinance within about seven years and more if you keep the loan longer. In plain dollars the crossover comes sooner, after about five years, because the higher-rate loan also leaves a slightly larger balance to pay off. Kept for all 30 years, that extra $40 a month adds up to about $14,300. The 7.40% base is Freddie Mac's Primary Mortgage Market Survey 30-year average for October 8, 2026, which tracks borrowers with good to excellent credit and 20% down.

What a half-point rate gap costs

Real quotes also include each lender's own pricing, so the gap between two borrowers can be wider than the fee alone. Illustrative example: the same $350,000, 30-year fixed loan at 7.40% and at 7.90%.

Monthly payment = P × i ÷ (1 − (1 + i)^−n), with i = rate ÷ 12, n = 360

At 7.40%: $2,423.33 a month; total interest $522,398.55
At 7.90%: $2,543.82 a month; total interest $565,774.81
Gap:      $120.49 a month;   $43,376.26 over 30 years

Even over the first seven years, the higher rate adds about $12,403 in interest.

Which scores mortgage lenders may use

The Federal Housing Finance Agency's credit score page (updated October 2, 2026) sets the rules for Fannie Mae and Freddie Mac loans. Since a July 8, 2025 interim policy, lenders may use VantageScore 4.0 or Classic FICO, and VantageScore 4.0 opened to all approved lenders on September 9, 2026. A lender picks the model loan by loan but must use the same one for every borrower on a loan. FICO 10T is approved but not yet eligible for delivery, and three-bureau reports are still required.

Fannie Mae's Selling Guide section B3-5.1-01 (April 22, 2026) sets no minimum score for loans run through its Desktop Underwriter system. Manually underwritten loans need at least 620 for a fixed rate and 640 for an adjustable rate, and lenders can set higher minimums.

FHA cutoffs by score

FHA uses a minimum decision credit score, the lowest score among the borrowers. Under HUD Handbook 4000.1, a score of 580 or higher qualifies for maximum financing, which on a purchase means a 3.5% minimum down payment. From 500 to 579 the loan is capped at 90% LTV, and below 500 it isn't eligible. Below 580, a manually underwritten loan is also held to 31% of income for housing and 43% for total debts.

HUD's Mortgagee Letter 2026-11 (October 8, 2026) adds FICO 10T and VantageScore 4.0 alongside Classic FICO for case numbers assigned on or after January 1, 2027. The thresholds don't change. For each model the lender takes the middle of three scores or the lower of two, then uses the lowest result across models.

Car loans, personal loans and cards

No federal source publishes auto, personal loan or card rates by score band; each lender sets its own tiers. The Federal Reserve's G.19 consumer credit release (October 7, 2026) gives only commercial-bank averages for August 2026 (preliminary): 7.54% on 60-month new-car loans, 11.90% on 24-month personal loans, and 21.19% on all card accounts, or 22.36% on accounts charged interest.

Illustrative example: a $30,000, 60-month car loan at 7.54% costs $601.71 a month and $6,102.53 in interest; at 8.54% it costs $616.07 and $6,964.47, so one extra point adds about $862.

Once a card account is open, the CARD Act rules in 12 CFR 1026.55 allow a rate increase on an existing balance mainly when a disclosed promotional rate of at least six months ends, when a variable rate follows its index, or when a minimum payment is more than 60 days late. After a late-payment increase, six on-time minimum payments in a row must bring that rate back down. A higher rate on new purchases needs advance notice and can't apply in the account's first year, and penalty increases need 45 days' written notice under 12 CFR 1026.9(g).

What moves a score and what doesn't

Utilization and the statement date

Card issuers generally report your balance at the end of each statement period, according to Experian's utilization explainer, and models may weigh the highest single-card ratio as well as the overall one.

Utilization = reported revolving balances ÷ total revolving credit limits × 100

Illustrative example: Card A has a $5,000 limit and $2,000 balance; Card B has a $10,000 limit and $1,000 balance.

Reported as is: $3,000 ÷ $15,000 = 20% overall, with Card A at 40% and Card B at 10%.
Paying $1,500 on Card A before its statement closes: $1,500 ÷ $15,000 = 10% overall, and Card A drops to 10%.
Paying it after the statement closes: the bureaus keep 20% and 40% until the next report.
Paying Card B to zero and closing it: $2,000 ÷ $5,000 = 40% overall, because its $10,000 limit leaves the calculation.

FICO says you don't need to carry a balance or pay interest to score well, and its amounts-owed page notes that a card paid in full every month can still show a balance on your report.

Hard inquiries

One hard inquiry takes less than five points off most people's FICO Scores, counts for a year and stays on the report for up to two, says myFICO. Mortgage, auto or student loan inquiries within a 14- to 45-day window, depending on the version, count as one.

Reporting limits, disputes and repair

Under the Fair Credit Reporting Act, 15 U.S.C. 1681c, collections, charge-offs and most other adverse items may be reported for seven years, and bankruptcies for ten. For collections and charge-offs, the seven years start 180 days after the delinquency began. The limits don't apply to reports used for credit of $150,000 or more, which covers many mortgage applications, though whether older items actually appear depends on the bureau.

If an item is wrong, you can dispute it with the bureau free of charge. Under 15 U.S.C. 1681i, the bureau must reinvestigate within 30 days, or up to 45 if you send relevant information during that period, and must notify the company that supplied the data within five business days. Free weekly reports at AnnualCreditReport.com are now permanent, according to the FTC.

Medical debt follows the bureaus' voluntary policies, which can change: they stopped reporting paid medical collections on July 1, 2022, wait a year before unpaid ones appear, and removed those with an initial reported balance under $500, per their April 11, 2023 joint announcement.

No one can legally remove accurate, current negative information, the FTC notes. The Credit Repair Organizations Act bars credit repair companies from charging before their services are fully performed and from making misleading statements.

Frequently asked questions

Why is the score my lender pulled different from the one in my app?

The two numbers usually come from different models, versions or bureaus. Mortgage lenders often pull Classic FICO, card and auto lenders may use industry scores, and each bureau's file can differ, so even one model can give three numbers.

Does checking my own credit lower my score?

No. FICO lists your own requests for your report or score among the inquiries its scores ignore, along with promotional inquiries behind pre-screened offers and reviews by lenders you already have accounts with. Only inquiries tied to an application for new credit count.

Whose score counts when two people apply for a mortgage?

On an FHA loan, the lender uses the lowest borrower's score. Fannie Mae applies its minimum-score rules to the average median score when there is more than one borrower, while its price grid uses the loan's representative score. A co-borrower with a weaker file can change both eligibility and price.

Can someone with no credit score get a mortgage?

Sometimes. FHA borrowers with non-traditional or insufficient credit histories can get maximum financing, but only with manual underwriting and the 31% and 43% ratio limits. On price, the January 2026 edition of Fannie Mae's matrix put a loan with no credit score in its lowest score band: 2.750% of the loan at 80% LTV.

Will paying off a collection raise my score?

It depends on the debt and the model. The three bureaus no longer report paid medical collections. FICO 9 ignores paid third-party collections, but FICO 8 can still count one, and a paid non-medical collection can stay on the report for up to seven years.

Steps before you apply

Pull all three reports two to three months before applying and dispute any errors; a dispute can take 30 to 45 days.
Pay card balances down before each statement closing date in the month or two before applying.
For a mortgage, find your score band and LTV in the current Fannie Mae LLPA matrix, and check whether a slightly larger down payment would move you into a cheaper column. Above 80% LTV, count mortgage insurance as well as the fee.
Ask each lender which score model it uses and whether the score-based fee comes as points or rate; compare offers on the same day.
Run each quoted rate through a loan calculator, such as the site's Loan Calculator, to see the monthly and lifetime gap in dollars.
Read any risk-based pricing notice or score disclosure you receive; its key factors show what lowered your score.