When it comes to eligibility for a home loan, many people focus almost entirely on how much money they have for the down payment. This also plays a crucial role, but with a high credit score, the need for a high down payment decreases.

While many people understand credit scores play an important role, few understand what that role is. Consider the following factors.

Mortgage options

There are four main mortgage options to choose from when seeking a home loan from traditional lenders. U.S. News points out that each type of mortgage carries a minimum credit score requirement. A credit score below 620 drastically limits the available mortgage options, while a credit score above 640 opens a lot of doors to aspiring property owners.

Interest rate

CNN shares that credit scores also determine interest rates. The lower the interest rate the better, but many people underestimate how even .5% in interest can affect monthly mortgage payments and the total interest repaid. Depending on the length of the repayment term and the total value of the property, this could increase monthly payments by several hundred dollars.

Some people move through adulthood with no need for credit, especially if they had a bad experience with credit in their younger years. The good news is that people who plan well enough ahead can begin to build credit in a number of ways.

Two common solutions involve becoming an authorized user on a trusted family member’s credit account and getting credit builder loans. Even credit reports with bankruptcies and delinquencies can improve with strong discipline and the help of experienced professionals.