Mortgage lenders and banks look at your credit history to determine if you are able to be approved for a USDA mortgage. Fortunately, USDA loans make qualifying easy for low- and middle-income families.
In this section we will break down USDA credit score requirements.
The USDA does not set a minimum credit score requirement, but most mortgage lenders will require a score of at least 600. With a 600 credit score you can be approved by a process called manual underwriting. If you have a credit score of 640 or higher, you can qualify for automatic approval using the USDA’s Guaranteed Underwriting System. (GUS). GUS is the USDA’s automated underwriting system, which automates the process of approving a USDA home loan application.
If you have a credit score below 640 and require manual underwriting, don’t worry, the process is easier than it sounds. Even people without a credit score at all can sometimes qualify, though there are additional requirements you must meet to receive a loan approval.
Credit guidelines will vary from lender to lender but we can help guide you to the right USDA home loan investor.
|FICO Credit Score Categories||Credit Score Range|
|Excellent||750 and higher|
|Good||700 – 749|
|Fair||650 – 699|
|Poor||550 – 649|
|Bad||549 and lower|
The USDA uses a tool called a Guaranteed Underwriting System, or GUS, to help automate the process of approving a USDA loan application..
Although USDA does not set a minimum credit score, GUS requires a credit score of at least 640 to automatically qualify for a USDA loan. If you have a lower credit score, you can still qualify for a USDA loan using manual underwriting. Manual underwriting typically involves more stringent guidelines.
Manual underwriting means that although you were not automatically qualified for a loan, you might still qualify with the help of compensating factors.
A compensating factors is a positive point that can strengthen your loan application, such as savings, low debt and other factors.
You can learn more about the USDA’s underwriting guidelines here.
If you do not have a credit history established, you might still qualify for a USDA loan. You will need to provide evidence of a “non-traditional tradeline,” This is another way to prove that you pay your bills on time.
Banks will sometimes require proof that you are paying any of the following bills on time:
The policies on non-traditional tradelines can vary from lender to lender.
Another great way to show your creditworthiness is to show that you have accumulated savings. If you are capable of saving money, you will have funds left over every month to help pay the new mortgage. Having reserves in your savings account – Example – three months of housing payments – can help convince mortgage underwriters you should be approved.
Not having a credit score means you will be doing manual underwriting, and so your loan officer will be able to help you figure out exactly what you need to qualify.