Hurtful rejections shaped Houghton's early club and international career. West Ham let him go after only one game and u-18 Scotland manager Andy Roxburgh said he wasn't good enough for Scotland. Houghton went on to star for Ireland, as his father was born in Donegal. Houghton was born in Glasgow, but moved to London when he was ten. Houghton had a monumental international career with a strong Irish side. He scored two of the most important goals in Irish national team's history. He grabbed the winner in the sixth minute in the opening game in Group B between Ireland and England in the European Championships in 1988. He was the hero again in the group stages of the World Cup in 1994 when Ireland defeated Italy with Houghton's twelfth minute goal. Ireland reached last sixteen, one stage less than in 1990 when Houghton played in Ireland's all five games on the road to the quarter-finals in the World Cup before being knocked out by Italy. Second division Fulham snapped him up after West Ham rejected him in 1982 and he made 145 appearances and scored 21 goals in a four-year spell. Houghton won the League Cup in his first season at first division newcomers Oxford United, scoring one goal in the 3-0 win in the final against QPR. Oxford placed 18 out of 22 first division teams in the two full seasons the Glaswegian spent at the club. 

Houghton was the last player in the Dalglish jigsaw in the side that walked away with the title in 1987/88 while Oxford were relegated in bottom place. In the first home game of the season against Oxford Kenny Dalglish wrote in his diary: "I was impressed, and not for the first time, by Ray Houghton’s performance in Oxford’s midfield. He looks a fine player and is a good competitor." Six weeks later Dalglish bought him to Liverpool. Craig Johnston was the man who had to make way and Houghton made an immediate impact scoring in his second appearance against Wimbledon two minutes after coming on as substitute for Johnston at Plough Lane. Houghton was an industrious player whose energetic runs inspired others and a great team player. He suited Liverpool's style perfectly and was a vital cog in their machine. Houghton slotted in smoothly on the right side of midfield with John Barnes on the opposite side, Steve McMahon and Ronnie Whelan or Nigel Spackman in the engine room and up front Peter Beardsley and John Aldridge. Houghton was Liverpool's hero when his header knocked out Everton in his first Merseyside derby in the fifth round of the FA Cup at Goodison Park. A surprising defeat to Wimbledon in the final prevented another domestic double.

Houghton played 52 out of 53 games the following season as Liverpool lost the League title to Arsenal on the last day of the season. Liverpool reclaimed the title in 1990 but Houghton had an injury-hit season and featured in 50% of 50 matches played. Houghton featured more in the 1990/91 season but it was overshadowed by Dalglish's decision to quit Liverpool. Houghton was a key player in Souness' first full season, scoring a career-best 12 goals therefore making the Scotsman's decision to sell him to Aston Villa in the summer, at the age of thirty, all the more puzzling. Steve McManaman was emerging as a promising right-winger but Houghton still had a couple of good years in him and could have been easily accommodated elsewhere in the team. Another rash decision by Souness as a boss.