How Credit Scores Affect Your Mortgage Rate in Tennessee

When it comes to buying or refinancing a home, few numbers matter more than your credit score. It’s one of the main factors lenders use to determine your mortgage rate and overall loan terms.

Even a small difference in your score can change your payment by hundreds of dollars a year, so it’s worth understanding how it all works.

How lenders view your score

Most lenders use versions of the FICO score (specifically FICO 2, 4, and 5 for mortgages). These range from 300 to 850, and generally, the higher your score, the lower your rate.

Here’s how scores are often categorized:

• 760 and above: Excellent

• 700–759: Good

• 660–699: Fair

• 620–659: Moderate risk (minimum for most Conventional loans)

• Below 620: Typically FHA or other credit-flexible programs

Each lender and loan type has its own standards, but in general, better credit equals better pricing.

How your score affects your mortgage rate

Mortgage rates are tiered based on “credit bands.” Moving from one band to another, even by just a few points, can make a noticeable difference in your rate.

For example:

• A borrower with a 760 score might qualify for 6.25%.

• A borrower with a 680 score might see 6.75% for the same loan.

That half-percent difference on a $400,000 loan adds up to around $130 a month, or more than $45,000 over a 30-year term.

Improving your score before you apply

If you’re a few months away from buying or refinancing, small steps can make a big difference.
Here are some of the most effective moves:

• Pay down credit cards to below 30% of your limit.

• Avoid new credit inquiries or opening new accounts right before applying.

• Keep older accounts open, since length of credit history helps your score.

• Double-check your credit report for errors or outdated accounts.

A local lender can often run a “what-if” simulation to show how specific changes, like paying off a small balance, might raise your score enough to unlock better pricing.

How loan programs factor in

Some loan types are more forgiving of lower scores:

• FHA loans allow scores down to around 580 (or sometimes lower with strong compensating factors).

• VA loans don’t technically have a minimum score, though lenders often look for 620 or higher.

• Conventional loans usually reward higher scores with better rates and lower mortgage insurance costs.

If your credit isn’t perfect, your lender can help compare options and find the best fit based on your current score and long-term goals.

The bottom line

Your credit score directly affects your rate, monthly payment, and long-term cost of homeownership. A few points of improvement can translate into meaningful savings.

If you’re planning to buy or refinance in Tennessee, visit HomeLoanLocals.com. You’ll be connected with one or two trusted local lenders who can help you understand your credit, show you real rate scenarios, and guide you toward the best path—without the spam or pressure.