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What Is the Credit Score Requirements on Home Loans in 2018

By Joe Silver

Anyone in the market to buy a home in 2018 needs to bone up quickly on their credit score. If you have low credit scores, you may be able to still buy a home, but your options will be more limited.

What is the credit score you need to buy a home? It really comes down to the loan program and the particulars of your finances. But this article can give you a good idea of what the minimum credit score requirements may be for different loan programs.

Conventional lenders usually require higher credit scores for approval, while FHA-approved sources have lower credit requirements for home loans. Here are the general guidelines and credit score requirements as of 2018:

  • FHA Home Loans – 580+ FHA credit score requirement (500-579 score is possible but unlikely)
  • VA Loans – 620+ credit score (some lenders require 580)
  • USDA Loans – 640+ credit score
  • FHA 203K Loans – 620+ credit score
  • Conventional Loans – 700+ credit score

Before the crash of 2008, it was a lot easier for people with bad credit to get loans. Mortgage lenders were less regulated than they are now. In 2010, the Dodd-Frank Wall Street Reform Act took effect. The law tightened up mortgage loan requirements and made it harder to get approved for a loan. This is especially true for those with lower credit scores.

For people with credit scores well under 700, you probably are best off with an FHA mortgage. These loans are backed by the Federal Housing Administration. FHA financing may have more flexible lending criteria because they are guaranteed by the US government in case of default. You may be able to qualify for a FHA-loan with a 620 or 640 credit score quite easily, if you have the income to pay the loan.

What Is a Low Credit Score Mortgage?

There are three credit unions that assign a credit score to you that ranges from 350-850. Your score will be different with the different bureaus because some lenders do not report to every bureau.

For the most part, a 700-credit score is thought of as 'good' by most lenders. You may not get the absolute best rates, but you will get a decent rate and will likely be approved. Most lending companies consider low credit scores to be mostly anything under 620. To review:

  • 500-579 = Low credit
  • 580-619 = Marginal credit
  • 620-679 = Fair credit
  • 680-739 = Good credit
  • 740 and higher = Great credit

Note that your credit score will greatly affect your interest rate. If you have a credit score under 580, you may pay 2% above the typical rate. If your score is above 580 to 619, you may pay 1% more. If your score is above 740, you will get the best rates. Ask about buying a home after a bankruptcy.

With FHA home loans, your score does not have as much of an effect on the rate.

How to Get Your Credit Score Up

You can get a home loan in many cases with a low to average credit score, but your loan options will increase dramatically once you get a credit score above 680, and especially above 700. To do so, experts recommend these credit tips:

  • Pay down credit cards: Your ratio of credit utilization is the credit percentage that is being used on all of your credit lines. This ratio is 30% of your score. So, the more your balances are, the lower your credit score is. This is why it is important to pay off your credit cards as much as you can before you get a home loan. By paying off, say, $10,000 off your cards, your score could go up 50 points at least.
  • Pay for delete: If you have a collection record on your credit report, you are taking a big hit on your FICO score. You should contact the collection agency to see if they will remove it if you pay the collection. If they agree to, you must get that agreement in writing. Remember, it often does NOT pay to pay off a collection because the negative item stays on your credit report for several years.
  • Be an authorized card user: If you have family members or close friends with good credit and credit cards, ask them if you can be an authorized user on their card or cards. The entire account history will be on your report. FICO does consider authorized card users in their ratios. You can add at least 30 points to your score doing this. Be sure the card holder has GOOD credit and always pays on that card.

The Bottom Line on Credit Rules and Requirements

It generally is easier to get a home loan today with poor credit than five years ago. This is especially the case if you apply for a FHA mortgage. But you will definitely increase your home loan options by getting your credit score as high as you can.

The above tips will help you to raise your score, and then once you have done that, you will be able to apply for a home loan and get the best rates. provides a news and information service by offering editorial content related to the housing and mortgage industry. FTHF has no affiliation with FHA, VA, USDA, Fannie Mae, Freddie Mac or any other government agency. This site does not guarantee low rate home loans. This website is not responsible for the accuracy of information or responsible for the accuracy of the rates, APR or mortgage guidelines posted by advertising banks, lenders and brokers.

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