Here’s the credit score you need to buy a home—it’s not a perfect 850

If a low credit score is keeping you from buying a home, you’re not alone. Nearly a quarter of Americans under 35 say that bad credit is preventing them from owning a home, according to CNBC’s Your Money survey conducted by Survey Monkey.

What does it take to buy a home? The minimum score needed can be as low as 500, but will ultimately depend on your lender and what type of mortgage you’re applying for.

“The higher your score the better, of course,” Melinda Opperman, Credit.org’s chief external affairs officer, tells CNBC Make It.

To qualify for a conventional loan, the most commonly used mortgage loan, you’ll typically need at least a credit score of 620, Experian says. Some lenders may require you to have a score above 660.

Credit scores range from 300 to 850 and measure how well you’re managing your debt. Here are the credit score ranges that qualify as poor, fair, good, very good and exceptional, according to Experian.

• Poor: 300 to 579
• Fair: 580 to 699
• Good: 670 to 739
• Very good: 740 to 799
• Exceptional: 800 to 850

Lenders use these scores to determine how risky it would be to lend money to you, which is why having a higher score can help you qualify for the best mortgage rates.

“The score is a measure of risk, so the lower your score, the more risk the lender is taking with you,” Opperman says. “The higher your score, the lower the risk, so a lender will charge you less interest the higher your score gets.”

When it comes to mortgages, a higher credit score can save you thousands of dollars in the long run. This is because your credit score directly impacts your mortgage rate, which determines the amount of interest you’ll pay over the life of the loan.

The national average for a 30-year fixed-rate mortgage is 6.98% as of Sept. 20, according to FICO. Your credit score would need to fall between 760 and 850 to qualify for that rate, per FICO’s website. If it does, your monthly payment on a $300,000 loan would be about $1,992, according to CNBC Make It’s calculations.

On the other hand, the average mortgage rate for credit scores between 620 and 639 is 8.57%. With that higher interest rate, your monthly payment would increase to around $2,322 on the same loan, according to CNBC Make It’s calculations.

That difference can really add up over time.

Over the course of 30 years, someone with a mortgage rate of 8.57% would pay an additional $118,714 in interest, compared with someone with the 6.98% mortgage rate, according to CNBC Make It’s calculations.

CNBC Make It’s mortgage calculator can help you understand how different mortgage rates would impact your potential monthly payments and interest charges.

Don’t panic if your credit score isn’t quite where you want it to be yet.

One option for improving your score before applying for a mortgage is to lower your credit utilization ratio, says Ted Rossman, senior industry analyst at Bankrate.com.

Your credit utilization rate, a measure of how much of your available credit you’re using at a time, plays a big role in how your credit score is calculated. Say you have a $3,000 credit limit and a balance of $600. Your credit utilization rate would be 20%.

To maintain or improve your credit score, financial experts recommend keeping your credit utilization rate below 30%.

Ultimately, you should try to show credit reporting agencies that you can successfully manage various types of credit by consistently keeping your debt low and by paying your bills on time, Rossman tells CNBC Make It.

“Improving your credit score it more of a marathon than a sprint,” he says.

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