What credit score do you need to get a USDA loan?

Most lenders look for a minimum credit score of 620 for a USDA loan.

But here’s a secret: The USDA does not set a minimum credit score, which means lenders can approve you with a lower credit score if they’re confident you can repay the loan.

The goal of USDA loans is to make homeownership more accessible, and flexible credit guidelines are one way they achieve that.

There’s also no down payment requirement. That makes these loans an affordable path to homeownership if you meet the income limits and are buying in a qualifying area. 

I don't meet the USDA credit score requirements, but I have a lot of savings. Can I still qualify?

A bad credit score will not necessarily prevent you from getting a USDA loan.

Lenders look at your credit history to determine whether you’re a creditworthy borrower. They look for things like a low credit utilization ratio and a record of on-time payments.

But they also realize things happen that can cause your credit score to drop. Maybe you went through bankruptcy a few years ago, or you fell behind on bills due to a health crisis. If your credit score is low, but you have minimal debts and solid savings, they may qualify you even with a score under 620.

The USDA does not set a minimum credit score, which means lenders can approve you with a lower credit score if they’re confident you can repay the loan.

Just keep in mind that you can have too much savings. You aren’t eligible for USDA if you have a 20% down payment, according to program rules.

Sometimes lenders look at factors such as on-time rent and utilities payments to fill in the gaps if you have a low score.

Not all lenders will work with borrowers who have lower credit scores. That’s why it’s worth applying with at least three, including one that often works with low-credit homebuyers. Even if a lender does not approve you right away for a USDA loan, they can offer tips on how to improve your odds of getting a loan a few months down the road.

Additional USDA loan criteria

Keep in mind that your credit score isn’t the only factor determining whether you can get a USDA loan.

There are also restrictions on the type of properties you can finance. The house must be in a qualifying rural or suburban area, and it must be a single-family residence -- no multifamily properties allowed.

USDA loan applicants are subject to income limits as well. Total household income cannot exceed 115% of the median household income of the area in which you want to buy.

Finally, USDA guidelines allow the lender to review the automated underwriting response to determine the debt-to-income ratio required for your transaction.

I don’t have the credit score needed for a USDA loan and I can’t afford a down payment. Is there any way I can buy a house?

If you don’t have good credit or a lot of savings, you can still become a homeowner.

FHA loans require a 580 credit score with a 3.5% down payment, and you can use gift funds to cover that cost.

If you’re a veteran or active-duty military servicemember, you may qualify for a VA loan with a 0% down payment.

As with USDA loans, there is no government-mandated minimum credit score for a VA loan, so you may qualify with a low score. But some lenders will require applicants to have a minimum 580 credit score.

Even some conventional loan programs have a 3% down payment and a 620 minimum credit score requirement (though you may need a higher credit score and down payment to go conventional in the current market).

Here’s something to consider, though. Although there are options for people with a lower credit score and little savings, you may want to take time to strengthen your finances first.

Owning a home is a huge commitment that comes with a lot of responsibilities. Missing payments or not being able to keep up with regular maintenance can have a lot of consequences — including the loss of the property.

If you don’t have an established habit of saving money or paying bills on time, it may be worth working on your credit score, building your savings, and establishing solid money management habits that will serve you as a homeowner.

How to boost your chances of becoming a homeowner

Homeownership is a great goal and can be helpful for building wealth, including generational wealth.

Here are some tips that can get you on that track:

Improve your credit score

There are a few ways to improve your credit score. They include clearing up multiple addresses on file, disputing inaccurate information, and paying off delinquent balances. It can also be helpful to speak with a mortgage lender to get insights on what else you can do to increase your chances of qualifying for a home loan.

Pay down debts

Paying down debt can improve your credit score and free up more disposable income. Both outcomes can improve your chance of getting approved for a mortgage at a competitive interest rate.

Save whatever you can

In real estate, cash is king. With more cash, you are eligible for more favorable loan terms and can craft more competitive offers when you’re up against other homebuyers. Also, the more cash you have for a down payment means the less your monthly mortgage payment will be.

Find additional sources of cash for down payment and closing costs

If you don't have much savings but want to buy your home sooner than later, it can't hurt to consider other sources of cash. You can ask friends and family for gifts to assist with down payment or closing costs. The latter usually works out to 3-5% of your loan amount, on top of any required down payment.

You might also even sell something of value that you don’t need and is just laying around the house to pad your down payment. A little creativity will go a long way,  plus it could save you thousands -- if not tens of thousands -- of dollars as a homeowner. The bigger your down payment, the lower your loan amount and the less interest you’ll pay.

Research down payment and closing cost assistance

Depending on the area where you are buying a home, you may be eligible for other types of down payment and closing assistance grants. An experienced real estate agent,  housing counselor, or lender may be able to connect you with resources that provide more information about these types of assistance.

USDA loan credit score requirements FAQs

Can I get a USDA loan with a 580 credit score? Lenders typically want borrowers to have a 620 credit score or above. However, if your score is less than 620, you may be eligible for a manual loan underwriting process that takes into account other financial information to approve your loan.

Is it hard to get approved for a USDA loan? If you’ve got a 620 credit score and meet all other requirements, such as being under the local income limit and buying in a USDA-eligible area, you may qualify for a USDA loan. The USDA gives lenders flexibility in determining who they approve for USDA loans. Even if you don’t quite have a 620 credit score or you have limited savings, it’s still worth talking to a lender.

What is the lowest credit score for a USDA loan? There is no minimum credit score for a USDA loan, but most banks look for a 620 credit score or above. If your score is lower, you could be approved with alternate credit verification information, such as payment histories on obligations like rent or utilities.

Getting started

Your finances don’t need to be perfect to buy a home. Loan options like USDA, FHA, and VA loans exist to make the path to homeownership easier. But you’ve still got to qualify for them.

Just a few months of conscious, deliberate actions like paying down debt, saving money, and improving your credit score can put you on more solid footing and increase your chances of qualifying. So, it’s worth getting started sooner than later.

*Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.

USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits. Fairway is not affiliated with any government agencies. These materials are not from USDA or RD and were not approved by USDA or RD or any other government agency.

Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.