How Have Credit Scores for Mortgage Borrowers Changed?

Mortgage Borrowers Have Higher Credit Scores Than in Prior Years

Just as credit scores have broadly trended upwards for several years for all consumers, so they have for mortgage applicants as well. Since 2016, average FICO^® Scores^☉ for all consumers rose from 699 in 2016 to 715 in 2024, according to Experian data. Meanwhile, those with a mortgage in their credit file saw a similarly sized increase, from 739 in 2016 to 758 this year.

Average FICO^® Score of Mortgage Borrowers, 2016-2024

Barring other financial complications, a FICO^® Score greater than 700 is usually strong enough to ensure a successful mortgage application. However, there are alternative loan programs for homebuyers whose credit score currently falls short or who may not have the 10% or more for a down payment, the minimum most conventional mortgages require. Some mortgage programs, such as those for veterans and first-time borrowers, have lower credit score and down payment requirements than conventional mortgages.

Source: Home Mortgage Disclosure Act data via CFPB, 2022

Despite lower loan amounts, some government-backed mortgage programs—such as Veterans Affairs (VA) loans, Federal Housing Administration (FHA) loans and U.S. Department of Agriculture (USDA) loans for rural borrowers—can cost those homebuyers more, versus borrowers with a conventional or jumbo loan. While the latter two types of mortgages cost those buyers less than 2% of the loan amount, VA, USDA and FHA mortgages cost closer to 4% of the loan amount, on average. However, for many homebuyers, loan costs are rolled into the monthly mortgage payments these new homeowners will be making.

Score Gap Largest for Millennials, Gen Xers

Average FICO^® Scores are higher for homeowners than for those who don't have a monthly mortgage payment. Despite the average higher levels of debt among homeowners, their FICO^® Scores are demonstrably higher than those without a mortgage, no matter the age of the consumer.

Source: Experian data as of Q2 2024; ages as of 2024

Baby boomers, even those without a mortgage, still have average FICO^® Scores above 700. Ages 60 to 78 in 2024, boomers likely have years of credit history to their name, which is a major factor in calculating FICO^® Scores. However, a 50-point difference between boomers without a mortgage and younger generations who rent suggest that factors apart from credit history length may be informing the difference.

One possible explanation: Baby boomers, in many cases, may be former homeowners who traded in their (perhaps) empty nest for something more manageable. Alternatively, they may simply be homeowners who've paid off their mortgage.

According to Census data, more than 79% of baby boomers ages 65 to 74 owned their own homes as of 2023, a similar rate to four years prior. Meanwhile, an even lower percentage of households under age 35 own instead of rent in 2023 than in 2019.

Source: 2019 American Housing Survey; 2023 American Housing Survey

Despite Credit Scores, Homes Still Out of Reach Due to Supply, Price

The reasons for the dip in homeownership rates among the young are familiar: home prices that have increased more than 20% on average during that four-year interval; not enough new housing being constructed to meet demand; and mortgage rates changing from often less than 4% percent prior to 2022 to often more than 7% since 2023.

Recent Home Mortgage Disclosure Act data shows that the mortgage market consists largely of consumers with strong credit histories. Their average scores are well above both the general population and those without mortgage payments. Essentially, while there are plenty of potential borrowers, the real challenge in the past two years has been the lack of available homes. Lifting your credit score above the national average won't necessarily make it easier to buy a home, but it could help you qualify for a loan or get a better interest rate.