How a 680 credit score affects your mortgage rate
For quite some time, mortgage rates have held near historic lows.
This boosts the “amount of home” a home buyer can purchase; and has increased the monthly savings available via a home loan refinance.
However, as many borrowers have learned the hard way, not everyone can access ultra-low rates.
For borrowers with conventional loans, the ability to access these “best mortgage rates” is directly linked to their credit scores.
But certain loan programs — specifically tailored to those with lower credit scores — can be more cost-effective. Here’s what you should know.
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Is 680 a good credit score?
FICO puts a 680 credit score in the “good” range. That means a 680 credit score is high enough to qualify you for most loans.
However, while 680 is a good credit score, it’s not the most competitive one.
What do we mean by that?
Well, in the second quarter of 2020, the median credit score for new mortgages was 786. Only 25% of mortgage borrowers qualified for a home loan between April and June had credit scores below. Furthermore, only 10% had credit scores less than 687, according to the data.
So when mortgage lenders are looking at a 680 credit score, they’ll typically see it as good enough to qualify you for a loan — but not high enough to offer lower interest rates.
That means it’s extra important to shop around with a few different lenders before deciding on a mortgage loan.
All lenders evaluate credit a little differently, and some are specifically geared toward borrowers with moderate credit scores.
One of these companies will be able to offer you a lower rate than a lender that prefers borrowers with scores in the mid- to high-700s.
you can get with 680 credit
As mentioned above, a 680 credit score is high enough to qualify for most major home loan programs.
That gives you some flexibility when choosing a home loan. You can decide which program will work best for you based on your down payment, monthly budget, and long-term goals — not just your credit score.
Here’s a high-level comparison of the different mortgage loans you can get with a 680 credit score:
|Mortgage Loan Type||Minimum Credit Score & Down Payment||Mortgage Insurance||Best For|
|PMI required, but can be canceled later||Borrowers with a down payment of 3% and good credit|
Fannie Mae HomeReady/
Freddie Mac Home Possible
|PMI required, but can be canceled later||Lower-income home buyers|
|PMI required with less than 20% down||Borrowers with a down payment of 5% or more|
|Mortgage insurance premium (MIP) required||Lower-credit borrowers|
|No continuing mortgage insurance||Veterans and service members|
|Mortgage insurance required, but it’s lower-cost than FHA or conventional||Buying a home in a rural area|
If you can make a 20% down payment, getting a conventional loan should be a no-brainer since you’ll be spared the cost of mortgage insurance.
If you’re making a smaller down payment, you may be better off with a 3%-down conventional loan than an FHA loan. Options include the conventional 97 loan, the Fannie Mae HomeReady loan, and the Freddie Mac Home Possible loan.
Both types — conventional and FHA — require mortgage insurance.
However, a conventional loan allows you to cancel mortgage insurance later on without refinancing the mortgage. Plus, there’s no upfront mortgage insurance fee on a conventional loan like there is on an FHA loan.
FHA is typically the better choice for people with credit scores in the high 500s to low 600s, who aren’t quite over the threshold of qualifying for a conventional loan.
And for anyone with eligible military service, a VA loan is often the best choice. VA loan rates are usually the lowest on the market, and no down payment is required. So if you’re a service member, veteran, or have another military affiliation, this option is worth looking into.
Mortgages that are harder to get with 680 credit
There are a few mortgage loan types that will be tougher to get with 680 credit. Namely:
- Jumbo loans: Typically require a 700-720 credit score or higher. In most parts of the U.S. a jumbo loan is any mortgage over $548,250
- 80/10/10 loans: This is a sort of hybrid mortgage that involves getting both a traditional mortgage loan and a home equity loan at the same time to avoid mortgage insurance. 80/10/10 loans might be available with a credit score of 680, but it will be easier to get one with a score in the 700s
- Home equity loan or home equity line of credit (HELOC): Home equity financing may be available with a 680 credit score. But many lenders set their own minimums starting at 700 or higher
If you’re looking to buy a more expensive home or tap into your home equity, it might be worth raising your credit score a little before you apply.
Even if you can qualify for one of these loans with a score of exactly 680, you’ll get better rates if your score is 700 or above.
How a 680
credit score affects mortgage rates
Conventional loan mortgage rates vary widely based on a borrower’s credit score.
Prime mortgage borrowers — those with 20% down and a credit score above 720 — get access to the “best and lowest mortgage rates” you see advertised online and in print. Everyone else gets access to something different.
When it comes to setting rates, 680 is right in the middle of the line.Take a look at a snapshot of FICO’s MyFICO mortgage rate tool, which shows how rates vary based on credit score:
|Credit Score||APR1||Monthly Payment|
1APR refers to the “effective interest rate” you’ll pay each year after the mortgage rate and loan fees are combined
2This rate snapshot was taken on November 8, 2021, and is for sample purposes only. It assumes a loan amount of $300,000. Your own interest rate and monthly payment will vary. Get a custom mortgage rate estimate here
In this example, the borrower with a 680 credit score has a mortgage payment that’s $64 more per month than someone with a 760 credit score.
That might sound like a small difference. But it adds up to $768 more per year, and an extra $23,040 over the 30-year life of the loan.
This is why experts recommend getting your credit score up as much as possible before applying for a home loan. Small differences in the short term can mean big savings in the long run.
How to improve a 680 credit score
Check your credit history
Checking your credit history is fairly easy, and free personal finance apps like Credit Karma and Experian make pulling free credit reports from the three major credit bureaus as easy as tapping a button.
While your credit report will score differently depending on the credit bureau — Transunion, Equifax, and Experian — monitoring your credit history is the first step to improving your average credit score.
Dispute errors on your credit report
It’s not uncommon for credit reporting agencies to have inaccurate information on your credit report. If you identify any errors, file a dispute with both the creditor and the credit bureau.
You can get free credit reports from freecreditreport.com and pull your FICO score from MyFico.
Pay down credit card balances and other debt
If you have any lingering high-interest credit card debt, then work on making larger debt repayments to bring down your credit utilization ratio.
Some people may confuse credit utilization with debt-to-income ratio.
Your credit utilization ratio is the amount of available credit that you’re using divided by your credit limit. So if you owe a total of $5,000 across three credit cards, but your credit limit for those three credit accounts adds up to $10,000, then your credit utilization is 50%.
It’s a best practice to keep your credit utilization below 30%. However, according to FICO, people with higher credit scores (think excellent credit) have credit utilization ratios of 10% or lower.
Don’t take out new credit accounts or loans
Whether you’re a first-time homebuyer or a homeowner on your third purchase, when it comes to debt, less is always best — especially when you’re looking to qualify for a new home loan.
Opening new credit accounts or any other type of loan will not only have a negative impact on your debt-to-income ratio, but the hard inquiries required to qualify for a loan can lower your credit score by several points each.
Similarly, avoid closing existing lines of credit, like credit cards, to keep your available credit limit higher. his is beneficial to your overall credit utilization ratio. Plus, the average age of your credit is also a factor in determining your credit score range.
Pay your bills on time
It’s estimated that your payment history makes up 35% of your credit score. Late payments can have a devastating impact on your credit history, dropping lower credit scores to bad credit status in a matter of months.
Compare 680 credit score mortgage rates today
As any mortgage professional will tell you, the only way to find the lowest mortgage rate is by shopping around.
Get estimates from at least three lenders — and remember to look at more than just the interest rate. Also compare:
- APR — Your “effective” rate when fees and loan costs are added in
- Points — Is the lender charging extra via “discount points” to reach the offered rate?
- Closing costs — How much does the lender charge upfront to set up your loan?
These figures will show you which lender is offering the best deal overall, not just a low rate with hidden fees that jack up the cost.
Remember, a 680 credit score is right on the borderline of “good.”
So it’s even more important to find a lender that will look at your credit profile favorably and offer you a great deal on your mortgage.