Your credit score directly affects the interest rate you’ll pay on investment property loans. A higher credit score can save you thousands of dollars over the life of a loan. For example, borrowers with excellent credit (760–850) may get an APR of 7.242%, while those with lower scores (620–639) face rates as high as 7.838%. This difference could mean paying $59,274 more in interest over 30 years on a $402,873 loan.
Key Takeaways:
- Excellent credit saves money: Lower APRs and monthly payments.
- Score ranges matter: Rates increase as scores decrease (e.g., 7.242% for 760+ vs. 7.838% for 620–639).
- Investment loans cost more: Typically 0.50%–0.75% higher than primary residence loans.
- Minimum requirements: Most lenders need at least a 620 credit score and a 25% down payment for investment loans.
Improving your credit score by paying bills on time, reducing credit utilization, and correcting errors on your credit report can help you qualify for better rates and terms.
Credit Scores and Interest Rate Basics
Credit Score Basics
Your credit score, which ranges from 300 to 850, plays a big role in determining your loan's interest rate. Lenders pay close attention to these scores, especially for investment property loans, as they are considered riskier than loans for primary residences. This score not only indicates your credit risk but also helps lenders decide how they’ll adjust your interest rate.
How Better Scores Lower Interest Rates
A strong credit score signals that you manage credit responsibly, which lowers the risk for lenders and can result in better interest rates. Since investment property loans are seen as higher risk, lenders typically add an extra 0.50% to 0.75% to the base interest rate compared to loans for primary residences. However, having a top-tier credit score can help reduce some of this added cost.
Here’s a closer look at how credit scores directly affect interest rates.
Score Ranges and Rate Examples
As of March 2025, here’s how different credit score ranges impact investment property loan APRs [4]:
| FICO Score | Mortgage APR |
|---|---|
| 760–850 | 7.242% |
| 700–759 | 7.449% |
| 680–699 | 7.555% |
| 660–679 | 7.609% |
| 640–659 | 7.711% |
| 620–639 | 7.838% |
For example, on a $300,000 loan, the difference in monthly payments between someone with an excellent score (760–850) and someone with a lower score could add up to hundreds of dollars.
"To get the best rates, you will want to put at least 25% down. The ideal loan-to-value ratio for investment purchases is 75% or less." - Jon Meyer, Loan Expert [2]
Most lenders require a minimum credit score of 620. To qualify for the best rates, you’ll typically need a score of 740 or higher, along with a significant down payment. Additionally, investment property loans often come with fees ranging from 2% to 5% of the loan amount when a 25% down payment is made [2].
How Credit Scores Impact Mortgage Interest Rates
Investment Property Loan Requirements
Investment property loans come with stricter rules and higher costs because lenders see them as riskier than loans for primary residences.
Why Investment Properties Cost More
Lenders charge more for investment property loans because borrowers are more likely to prioritize their primary home mortgage if money gets tight. To manage this risk, lenders take extra precautions:
- Higher interest rates: Typically 0.50%–0.75% above standard rates
- Stricter credit score requirements
- Larger down payments
These measures directly influence how much you’ll need for a down payment, as explained below.
Credit Score and Down Payment Rules
Your credit score plays a big role in determining your down payment and interest rate. Higher scores mean smaller down payments and better rates, while lower scores require more upfront cash.
Here’s a breakdown of how credit scores affect these factors:
| Credit Score | Minimum Down Payment | Typical Interest Rate Premium |
|---|---|---|
| 680+ | 15% | +0.50% |
| 620–679 | 25% | +0.75% |
| Below 620 | May not qualify | N/A |
This is quite different from loans for primary residences, where down payments can be as low as 3% [5]. For investment properties, most lenders prefer scores of 680 or higher [6], though some may accept scores as low as 620 if you can make a larger down payment.
Borrowers with a credit score above 740 and a 40% down payment often secure the best rates and terms [2].
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Steps to Improve Your Credit Score
Boosting your credit score can help you secure lower interest rates on loans. Here’s how you can work toward that goal.
Build a Strong Payment History
Your payment history makes up 35% of your FICO score [7]. Missing payments can hurt your score, so staying consistent is key. Here are some tips to help:
- Set up automatic payments a few days before the due date.
- Use payment reminders to stay on track.
- Maintain an emergency fund for unexpected expenses.
- If you're struggling to pay, contact your creditors right away to discuss options.
Reduce Your Credit Card Balances
Credit utilization - how much of your available credit you’re using - plays a big role in your score. Keeping it under 30% is good, but staying in the single digits is even better [7]. Try these strategies:
- Make multiple payments throughout the month to keep balances low.
- Ask for a credit limit increase on your current cards.
- Keep paid-off cards open to maintain a higher total credit limit.
- Pay off your balances in full each month whenever possible.
Correct Errors on Your Credit Report
A study by the Federal Trade Commission found that 26% of consumers have errors on their credit reports that could make them look riskier to lenders [8]. Common mistakes include:
- Wrong payment dates: Check and provide accurate records.
- Accounts that aren’t yours: Review your report and submit proof of identity.
- Closed accounts listed as active: Offer documentation showing the account closure.
- Duplicate entries: Request that duplicates be removed.
To fix these issues:
- Get your credit reports from all three major bureaus and highlight any errors with evidence.
- File disputes both online and in writing.
- Check back after 30 days to ensure the corrections are made.
- Keep thorough records of all your communications and submissions.
Benefits of High Credit Scores
Save Money on Interest
Your credit score has a direct impact on the interest rates you’ll pay on loans. For example, on a $402,873 loan, borrowers with excellent credit scores (760–850) get an APR of 7.242%. In contrast, those with lower scores (620–639) face a higher APR of 7.838% [4]. This difference adds up: borrowers with top-tier credit save about $165 each month and $59,274 in total interest over 30 years [4]. These savings can significantly improve cash flow and long-term financial returns.
Better Loan Terms and Fees
A high credit score doesn’t just lower your interest rates - it can also lead to reduced fees and more flexible repayment options. Lenders see borrowers with excellent credit (740 and above) as lower-risk, which means they’re more likely to offer better overall terms. This can make it easier to get approved and reduce the overall costs of investment property financing [9]. Additionally, qualified investors may gain access to specialized financing options that further improve loan conditions.
Financing Through Helio Urban Development
Having excellent credit can also open doors to exclusive financing opportunities. Helio Urban Development, for instance, offers streamlined financing options paired with fixed-price construction contracts. For investors with excellent credit, their services help lower borrowing costs and boost returns. Highlights include fixed-price construction costs at $168 per square foot, access to government incentives, and expert guidance to maximize profitability.
The table below breaks down how credit scores affect the costs of a $402,873 loan over 30 years:
| Credit Score | APR | Monthly Payment | Total Interest (30 Years) |
|---|---|---|---|
| 760–850 | 7.242% | $2,746 | $585,730 |
| 700–759 | 7.449% | $2,803 | $606,168 |
| 680–699 | 7.555% | $2,832 | $616,696 |
| 660–679 | 7.609% | $2,847 | $622,075 |
| 640–659 | 7.711% | $2,875 | $632,264 |
| 620–639 | 7.838% | $2,911 | $645,004 |
Based on a $402,873 loan amount with a 30‑year fixed rate [4]
Summary
Credit scores play a major role in determining financing costs for investment properties. Borrowers with high credit scores (760–850) often qualify for lower interest rates, potentially saving about $59,274 in total interest over a 30-year mortgage compared to those with lower scores [4].
Your credit score doesn’t just impact interest rates - it also affects down payment requirements and overall loan terms. Investment property loans usually come with higher rates than traditional mortgages, but maintaining a strong credit score can help reduce these extra costs and secure better terms.
To improve your loan terms, consider these steps:
- Keep credit card balances below 30% of your available credit [3]
- Pay all bills on time and consistently [3]
- Avoid opening new credit accounts before applying for a loan [3]
- Compare offers from multiple lenders, which could save you an average of $76,000 in interest over the life of the loan [1]
These strategies, along with the detailed credit-improvement tips mentioned earlier, can help you secure the best possible financing for your investment property.
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