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UPDATED GUIDELINES: USDA Credit Score Requirements

October 23rd, 2020 by Sean Stephens

UPDATED GUIDELINES: USDA Credit Score MinimumsUSDA credit score guidelines formerly listed specific minimum credit score requirements, and a credit score cutoff for loans that should not be approved… but USDA credit score guidelines have recently been updated.

In today’s short video, I will discuss current USDA minimum credit score qualifying requirements along with the applicable updated guidelines.

Now, before we get started, don’t forget to take advantage and download our “USDA Blueprint for Success.” This FREE guide is designed to walk you through the USDA process step-by-step and is a great tool for both homebuyers and realtors.

USDA Credit Score Guidelines

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.”

As mentioned, USDA credit score guidelines no longer have a defined minimum credit score, but they do require that an applicant have a validated credit score.

However, USDA also states that, “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.”

Furthermore, even though USDA guidelines do not have a defined minimum credit score, lenders may establish their own minimum credit score requirements which can vary from lender to lender.

USDA Guaranteed Underwriting System

USDA Guaranteed Underwriting System

Ultimately, 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.

These underwriting recommendations dictate the way lenders approve a USDA loan and what minimum required documentation is needed for loan closing.

An 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, a GUS recommendation of a Refer, Refer with Caution, and for those Manually Underwritten loans, it requires a more stringent review of the loan file along with a validated credit score 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.”

This means that the applicant must have at least 2 credit tradelines (accounts) that have existed on their credit report for a minimum of 12 months.

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;
  • collections;
  • charged-off accounts; and
  • authorized user accounts where additional qualifying criteria have been met.

USDA Credit Score – Lender Specific Requirements

In summary, in order to obtain USDA loan approval, remember that minimum credit conditions will be required which includes having an acceptable credit reputation. Plus, although USDA guidelines do not have a defined minimum credit score, lenders often have their own established minimum credit score requirements. Thus, minimum credit conditions can vary from lender to lender.

Remember, as a USDA approved lender we are here to help! Just call or email if you have any qualifying questions, want to discuss a new scenario, or would like to take advantage of our free 2nd opinion service… it’s great for existing transactions!

800-806-9836 Ext. 280
SeanS@MPLX.org

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

P.S. Click here to download our “USDA Blueprint for Success.”

FREE USDA Guidelines Report

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