Part 1 – USDA Loan Credit Score Requirements: Is there a USDA Loan Minimum Credit Score?
Part 1 – USDA Loan Credit Score Requirements: Is there a USDA Loan Minimum Credit Score in Florida, Texas, Tennessee, or Alabama?
When qualifying for a mortgage, everybody knows that your credit scores are critical, but depending on the loan program or lender, minimum credit score requirements can vary. Unfortunately there are many lenders who continue to provide misinformation and tell homebuyers and Realtors that a 640 score is the minimum required USDA Loan credit score.
Thankfully, this is yet another myth! In today’s short video, I will explain the details surrounding the guidelines that will help keep your loan headed to the closing table.
If you have recently been denied for a USDA loan because of your credit score, please take advantage of our free Second Opinion Services (“SOS“) which can provide assistance for both new pre-qualifications or those loans currently in progress. This is a great way to receive an expert second opinion, double-check where you stand, and make sure that all important financing stays on track!
USDA Loan Credit Score Requirements: Is there a USDA loan minimum credit score?
As a starting point, USDA defines a credit score as follows:
“A credit score is a statistical number that evaluates an applicant’s creditworthiness based on their credit history. The credit score considers payment history, amounts owed, percentage of credit used, length of credit history, types of credit, and newly acquired credit.”
With that being said, USDA does not have a minimum credit score requirement!
However, the USDA Guaranteed Underwriting System (“GUS”) will determine the acceptable credit score to be used which depends on whether it is an Accept, Refer, or Refer with Caution underwriting recommendation. As a USDA approved lender, we will utilize the GUS underwriting system to assist in determining USDA eligibility.
For example, a GUS Accept recommendation provides for streamlined processing and simply means that GUS has accepted the credit as is with no further credit score validation required.
However, if GUS provides a response of Refer, Refer with Caution, or for those Manually Underwritten loans, it will require a more stringent review of the loan file along with a minimum credit score validation as follows:
“One applicant whose income and/or assets is used to originate the loan must have a validated credit score. This applicant must have two tradelines on the credit report that have been/were/are open for 12 months based on the date the account was opened as stated on the credit report. A validated score does not indicate the applicant has an acceptable credit history. A validated score confirms that one applicant has an eligible minimum credit history.”
Additionally, USDA guidelines state that the following tradelines are eligible to validate the credit score and may be open, closed, and/or paid in full:
• loans (secured/unsecured);
• revolving accounts;
• installment loans;
• credit cards;
• charged-off accounts; and
• authorized user accounts where additional qualifying criteria has been met
In summary, in order to obtain USDA loan approval, minimum credit conditions will be required which includes having an acceptable credit reputation. Additionally, although USDA guidelines do not have a defined minimum credit score, lenders may establish minimum credit score requirements that must be met, so always check with your lender to determine what their USDA minimum credit score requirements are.
It is also important to remember that a certain credit score does not guarantee approval, but achieving a minimum score does open up the range of potential eligible loan programs with higher scores and stronger credit profiles contributing towards loan approval.
As a USDA Approved Lender, we will walk you through the USDA loan qualifying process step-by-step. Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
(800) 806-9836 X 280
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P.S. – Remember to CLICK HERE to download your Free USDA Blueprint for Success!