MW This one number explains the growing gulf between people who can afford to buy a house today - and those who can't

By Aarthi Swaminathan

The typical home buyer's credit score is at the highest level in more than a decade

Improving one's credit score from "fair" to "very good" can save a person about $31,000 in mortgage savings when buying a house, research shows.

Here's another sign of how exclusive today's housing market is: Buyers' credit scores are higher than ever - 20 points higher than the average American's, according to a new report from Realtor.com.

The typical home buyer's FICO $(FICO)$ credit score was 735 in the third quarter of this year, according to Realtor.com; that's roughly 20 points higher than the national average. The website used data from mortgage-technology company Optimal Blue in its report.

The average credit score for typical home buyers was at the highest level in nearly a decade - a "sign that today's market continues to favor financially strong buyers able to navigate higher prices and tighter lending standards," Realtor.com said.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

FICO scores are used by mortgage lenders to estimate how likely a potential borrower is to pay back a loan on time. FICO scores impact a home buyer's mortgage rate, as well as their loan amount, and their ability to qualify for certain loans.

A FICO score of 735 falls within the "good" range of 670 to 739, while a score of 740 to 799 is considered "very good." Exceptional credit scores are 800 and over.

Most Americans have a "good" FICO score or better, according to Experian (UK:EXPN) (EXPGY).

Any scores 720 and above are considered "superprime," meaning that such borrowers are considered very creditworthy.

Conversely, a subprime credit score is one between 580 and 619, according to the Consumer Financial Protection Bureau.

Having higher credit scores is just one way that today's home buyers are different from those of the past.

Related: It took this couple a year to buy a home. Here's what they say about today's 'buyer's market.'

Buyers are also much older, less likely to have young children living with them, and more likely to be repeat home buyers than in years past, according to a 2024 report by the National Association of Realtors profiling home buyers and sellers.

Related: What FICO's credit-score shake-up really means for home buyers

While income doesn't directly determine someone's credit score, wealthier people tend to have higher scores.

Elevated credit scores among home buyers serve as fresh evidence that richer buyers are not pulling back on home purchases, even as the housing market remains expensive and unaffordable to most people.

That trend is also seen in the brisk pace of luxury-home sales. In the first seven months of this year, sales of properties over $750,000 rose about 6% from the same period the previous year, while sales below that amount fell 3%, Realtor.com noted.

That matches data from the National Association of Realtors. In August, sales of existing homes priced $1 million and above rose the most among all price categories, according to the NAR. Year over year, sales of homes over $1 million dollars rose 8.2%.

To be sure, home buyers don't need a high credit score to buy a house.

Mortgages backed by the Federal Housing Administration, for instance, offer home loans to people with credit scores as low as 500, according to the U.S. Department of Housing and Urban Development.

But having a higher credit score gives a buyer several significant advantages - including access to more types of mortgages, lower mortgage rates and generally better loan terms - since lenders see higher scores as a marker of creditworthiness.

MarketWatch recently profiled a home buyer who was able to buy her first home. Part of preparing for that purchase included going from a credit score of 515 to 821. Borrowers can improve their credit score by applying for a new line of credit only if you need it and paying bills on time, among other steps.

When a prospective buyer's credit score goes from "fair" to "very good," that can save them about $31,000 in mortgage savings, according to a report by LendingTree (TREE).

"There's little in life that's more expensive than having crummy credit, and that's certainly the case when it comes to a mortgage," Matt Schulz, LendingTree's chief consumer-finance analyst, said in the report.

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-Aarthi Swaminathan

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October 22, 2025 08:00 ET (12:00 GMT)

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