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What is the minimum credit score for a USDA loan? Is it possible to go lower than 500?

Quick Summary

  • USDA-approved lenders require at least a 640 credit score for USDA home loan applications.
  • People with poor credit can still be eligible for a USDA loan if they have experienced a “extenuating circumstance.”
  • The USDA assigns you a credit score for loan eligibility based on three credit bureaus.

Your credit score is a huge determining factor when it comes to applying for a USDA loan. Some lenders may only consider your application if it exceeds a specific threshold, which is why it’s critical to be up to date on the benchmark credit scores and other loan application requirements before you try applying for a loan.

In this article, we’re going to answer that important question; what credit score do you need for a USDA loan? We’ll explain how to get around it even if you don’t meet the set score and how you can still get a USDA loan even with bad credit.

Can You Get a USDA Loan Even If You Have Bad Credit?

Although the USDA does not have set credit score requirements, most USDA home loan lenders will require a minimum credit score of 640 before considering you for a loan. The following is a credit score guideline:

  • Credit scores of 640 and higher are required for automated writing eligibility.
  • Scores of 580 and higher require manual underwriting guidelines if a documented credit waver is provided.
  • Loans with credit scores of 580 or lower should not be considered.

This means that you can still be authorized for a USDA loan even if you have a low credit score; however, your lender will have to personally process your application.

How to Get a USDA Loan When You Have Bad Credit

A FICO credit score of 580 or below is considered to be bad. A credit score like that is below the average U.S consumer’s and proves to lenders that you might be a risk if they approve your loan request.

However, just because your credit score is low does not preclude you from obtaining a USDA loan. When your credit score falls below the USDA standard of 640, lenders must process your application manually rather than using the guaranteed underwriting system.

To improve your chances of getting approved for a loan with a bad credit score ratings, you should ensure you provide the following compensating factors:

  1. Having a low debt-to-income ratio
  2. A sizable sum in your savings account.
  3. Excellent rental payment history.
  4. A college diploma.
  5. Employment verification.

What Credit Bureau Is Used for a USDA Loan?

You must be assigned a credit score in order to qualify for a USDA mortgage. This credit score is usually calculated by taking the middle of the three assigned scores from the three bureaus: Experian, Equifax, and TransUnion.

There are some cases where individuals have no credit established or no credit history reporting at all being monitored by the bureau but, can still qualify for a USDA loan. In this case, applicants can replace their credit scores for non-traditional credit score submissions like: electric bills, water bills or rental payment that has been verified by an eligible source.

Is it possible to get a USDA loan with a credit score of 500?

Although this form of loan demands a solid credit score rating to boost your chances of approval, there is one gray area in the system that you can take advantage of. Borrowers with lower credit scores, often as low as 500, may be eligible provided they have a “extenuating circumstance.”

This is an uncontrollable event, such as a medical ailment or being dismissed from a job. You must be able to demonstrate that the borrower’s poor credit scores were caused by circumstances rather than irresponsible financial judgments.

You should contact with a USDA-certified lender to see if you qualify under these terms.

How Far Behind Does a USDA Loan Fall?

While USDA lenders typically complete transactions in 4-5 weeks, the processing time may vary.

USDA loans can be used for many different types of properties including new construction, refinancing, and buying and fixing up a property that needs work, so depending on your needs and financial situation the turnaround times can vary.

Don’t Let a Bad Credit Score Stop You From Getting a USDA Loan

A bad credit score, or no credit score at all, should not be an impediment to applying for and receiving a USDA loan. Applicants with lower credit scores than those required by the USDA can still benefit from this development loan by increasing their chances of approval.

Alternative means of payment, such as child school fees and phone bills, can be provided for individuals who do not have a credit score. People who have fallen below the benchmark credit score are still eligible to apply, but they may face higher fees and different loan terms.


Quicken Loans offers USDA loans.

Quicken Loans, one of America’s major mortgage lenders, presently does not offer USDA loans. They do, however, offer additional loans for people looking for similar 0% downpayment choices.

What Are My Chances of Getting a USDA Loan Approved?

To increase your chances of getting approved for a USDA loan, meeting all the requirements and ensuring you go through their eligibility guidelines before you start your application process should give you an upper edge.

Why Would a USDA Loan Be Rejected?

There are various reasons why a USDA loan may be denied, but the most prevalent are: excessive household income, low credit, unverifiable income, or a non-USDA approved home. Usually your lender will provide you with documents explaining why your loan got denied as well as some alternative financing options.

Is it possible to get a USDA loan if I have collections on my credit?

Yes, you can still acquire a USDA loan with collections on your credit card. However, USDA requirements specify that you must make adequate payment arrangements before your USDA loan will be guaranteed.

What Is the USDA Loan Debt-to-Income Ratio?

A USDA loan has a maximum debt-to-income ratio of roughly 41%. This factor calculates how much of your monthly income goes toward debt repayment.

Does Credit Karma Display Your True Credit Score?

Yes, the credit scores displayed on Credit Karma are accurate. These scores are provided by two of the three major credit agencies, TransUnion and Equifax.