Is 720 a Good Credit Score to Buy a House? Loan Options Explained

Key Takeaways

• A 720 credit score is strong for homebuying, giving you access to most mortgage programs and competitive interest rates.
• While 720 qualifies for good pricing, scores of 740+ unlock the very best rates, so a small improvement can lead to long-term savings.
• With a 720 score, you can qualify for conventional, FHA, VA, and USDA loans, each offering different benefits depending on your down payment and eligibility.
• Your mortgage rate still depends on other factors, including market conditions, debt-to-income ratio, employment stability, and the size of your down payment.
• Rental Kharma can help renters boost their credit scores by reporting on-time rent payments to major credit bureaus, potentially helping you reach the 740+ threshold for better rates.

Is 720 a Good Credit Score for Buying a House?

If you’re wondering whether a 720 credit score is good enough to buy a house, the short answer is yes. A 720 falls within the “good” credit range, which typically spans from 670 to 739 on the FICO scoring model. This puts you in a favorable position when applying for a mortgage.

With a 720 credit score, you’ll have access to most loan programs and should qualify for competitive interest rates. Lenders view borrowers in this range as relatively low-risk, meaning you’ve demonstrated responsible credit behavior over time. If you have a history of on-time payments, manageable debt levels, or a solid mix of credit accounts, a 720 score signals to lenders that you’re likely to repay your mortgage.

That said, a 720 score doesn’t quite reach the “excellent” tier, which begins at 740. Borrowers with scores in the mid-700s and above typically receive the most favorable loan terms, including the lowest interest rates and reduced fees. The good news is that if you’re sitting at 720, you’re not far from that next tier. Even a modest improvement could make a meaningful difference in your monthly payment and the total amount you pay over the life of your loan.

What Mortgage Rates Can You Expect with a 720 Credit Score?

Mortgage lenders use credit score tiers to determine the interest rates they offer. While exact rates fluctuate based on market conditions, your score plays a major role in where you land within a lender’s pricing structure.

A 720 credit score typically falls into the 720–739 tier. Borrowers in this range receive solid rates, but they’re usually a step above what someone with a 740 or 760+ score would receive. Lenders often reserve their absolute best pricing for borrowers in the 760 and above category.

The difference between tiers might seem small on paper, but it adds up over time. Even a slight variation in your interest rate can translate to noticeable savings on your monthly mortgage payment. Over a 30-year loan term, that difference compounds significantly.

If your score is hovering around 720, it may be worth taking a few months to strengthen your credit before applying. Bumping your score into the 740+ range could help you secure better terms. However, timing matters too. If mortgage rates are favorable and you’re ready to buy, waiting too long to improve your score could backfire if rates rise in the meantime.

The key is to weigh your options carefully. If your score is on the cusp of the next tier, a little effort to boost it could pay off. But if you’re confident in your financial situation and find a home you love, a 720 score is more than sufficient to move forward.

Loan Options Available with a 720 Credit Score

Conventional Loans

Conventional loans are the most common type of mortgage and are not backed by a government agency. They’re offered by private lenders such as banks, credit unions, and mortgage companies.

With a 720 credit score, you comfortably exceed the minimum requirement of 620 that most lenders set for conventional loans. You may qualify for a down payment as low as 3%, depending on the loan program. However, if your down payment is less than 20%, you’ll likely need to pay private mortgage insurance (PMI) until you build enough equity in the home.

Conventional loans work well for borrowers with good credit and stable income. Your 720 score positions you nicely for approval and competitive terms.

FHA Loans

FHA loans are backed by the Federal Housing Administration and are designed to help first-time homebuyers and those with lower credit scores achieve homeownership.

The minimum credit score for an FHA loan is 580 with a 3.5% down payment. Since your 720 score far exceeds this threshold, you’d easily qualify. However, FHA loans come with both upfront and annual mortgage insurance premiums, which can increase your overall costs compared to a conventional loan.

For borrowers with a 720 score, a conventional loan often makes more financial sense in the long run. But if you prefer a lower down payment or have other qualifying factors that make FHA attractive, it remains a solid option.

VA Loans

If you’re a veteran, active-duty service member, or eligible surviving spouse, VA loans offer exceptional benefits. Backed by the U.S. Department of Veterans Affairs, these loans require no down payment and have no official minimum credit score set by the VA itself.

In practice, most lenders prefer borrowers to have at least a 620 credit score. With a 720, you’re well above that threshold and should have no trouble qualifying for favorable terms. VA loans also don’t require private mortgage insurance, which can result in significant savings.

USDA Loans

USDA loans are designed for homebuyers purchasing in eligible rural and suburban areas. Backed by the U.S. Department of Agriculture, these loans offer zero down payment for qualifying borrowers.

While the USDA doesn’t set a strict minimum credit score, most lenders look for a score of at least 620 to 640. Your 720 credit score puts you in a strong position to qualify. USDA loans also come with lower mortgage insurance costs compared to FHA loans, making them an affordable choice for buyers in eligible locations.

Tips to Strengthen Your Credit Before Applying

Pay Every Bill on Time

Your payment history is the single most important factor in your credit score. Even one missed payment can cause a noticeable drop. Set up automatic payments or reminders to ensure every bill, from credit cards to utilities, gets paid on time.

Keep Credit Utilization Low

Credit utilization refers to how much of your available credit you’re using. Aim to keep your balances below 30% of your credit limits, and even lower if possible. Paying down existing balances before applying for a mortgage can give your score a quick lift.

Review Your Credit Reports for Errors

Mistakes on your credit report can drag down your score unfairly. Request free copies of your reports from all three major bureaus and review them carefully. If you spot inaccuracies, dispute them promptly to have them corrected.

Avoid Opening New Credit Accounts

Each time you apply for new credit, a hard inquiry appears on your report, which can temporarily lower your score. In the months leading up to your mortgage application, avoid opening new credit cards or taking out other loans.

Turn Your Rent Payments into Credit-Building Power

If you’re a renter, your largest monthly expense likely isn’t helping your credit score. Rent reporting services like Rental Kharma can change that by reporting your on-time rent payments to major credit bureaus. This adds positive payment history to your credit file and can help push your score into a higher tier before you apply for a mortgage.

Other Factors Lenders Consider Beyond Credit Score

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income. Lenders typically prefer a DTI below 43%, though some loan programs allow higher ratios with compensating factors. A lower DTI signals that you have room in your budget to handle mortgage payments comfortably.

Down Payment Size

The size of your down payment affects your loan-to-value ratio and can influence your interest rate. A larger down payment reduces the lender’s risk, which may result in better terms. It also helps you avoid or reduce mortgage insurance costs.

Employment and Income History

Lenders want to see stable employment and consistent income. They typically look for at least two years of employment history in the same field. If you’re self-employed, you may need to provide additional documentation such as tax returns and profit-and-loss statements.

Assets and Reserves

Having savings and other assets reassures lenders that you can cover closing costs, make your down payment, and handle unexpected expenses. Some loan programs require you to have a certain number of months’ worth of mortgage payments in reserve.

Build Credit the Smart Way with Rental Kharma

If you’re working toward homeownership and want to strengthen your credit score before applying for a mortgage, Rental Kharma can help you get there faster.

Rental Kharma reports your rent payment history to TransUnion and Equifax, turning your largest monthly expense into a powerful credit-building tool. With over 13 years of experience and more than 125,000 families helped, we’ve made it our mission to help renters build the credit they deserve.

For a $75 one-time setup fee, Rental Kharma reports all of your past rental payment history at your current address. There are no additional charges for retroactive reporting, and our service works no matter how you pay rent, whether by check, cash, money order, or electronic transfer. A simple 5-minute landlord verification call is all it takes to get started.

What sets Rental Kharma apart is our human-powered approach. Real people guide you through the process, and same-day verifications help expedite your credit reporting. We also offer unlimited one-on-one mentoring sessions designed to help you reach the goal of a 720 credit score or higher. Members who complete the 30-minute mentoring session see an average increase of 60 points in just 6 to 8 weeks.

With a 90-day money-back guarantee, transparent pricing, and dedicated support, Rental Kharma makes credit-building accessible and practical for renters preparing to buy a home.

Get Started with Rental Kharma →

Frequently Asked Questions (FAQs)

Can I buy a house with a 720 credit score?

Yes, a 720 credit score is considered “good” and qualifies you for most mortgage programs, including conventional, FHA, VA, and USDA loans. You should be able to secure competitive interest rates, though borrowers with scores of 740 or higher typically receive the best terms.

What loan type is best for a 720 credit score?

For most borrowers with a 720 score, a conventional loan is often the best choice because it offers competitive rates without the long-term mortgage insurance costs associated with FHA loans. However, if you’re a veteran, a VA loan may provide even better terms with no down payment required.

Should I wait to improve my credit before buying a house?

It depends on your situation. If your score is close to the next tier (740+), spending a few months improving your credit could result in a lower interest rate and long-term savings. However, if rates are favorable and you’re ready to buy, a 720 score is strong enough to move forward confidently.

How does Rental Kharma help improve my credit score for a mortgage?

Rental Kharma reports your on-time rent payments to TransUnion and Equifax, adding positive payment history to your credit file. Since payment history is the most important factor in your credit score, this can help boost your score and position you for better mortgage terms. Many members see an average 40-point increase in just days after their rental history is reported.

Disclaimer: Credit score improvements vary by individual based on credit history, payment consistency, and scoring models. The results mentioned are averages and not guaranteed. For current pricing, visit Rental Kharma’s website. This article is for educational purposes only, not financial advice.