A low credit score does not automatically disqualify you from buying a home. Several loan programs are specifically designed for borrowers with imperfect credit, and knowing which programs you qualify for is the first step.
Find lenders that work with lower credit scores: Compare options on LendingTree — includes lenders that specialize in FHA loans for buyers with credit challenges.
What “Bad Credit” Means for Mortgage Lenders
Lenders define credit tiers differently, but here is a general breakdown:
| Credit Score Range | Classification | Loan Options Available |
|---|---|---|
| 740+ | Excellent | All loan types; best rates |
| 700–739 | Good | All loan types; competitive rates |
| 660–699 | Fair | FHA, conventional (higher PMI), VA, USDA |
| 620–659 | Below average | FHA, VA, USDA; conventional possible with compensating factors |
| 580–619 | Poor | FHA (3.5% down), VA (no minimum), USDA (typically 640+) |
| 500–579 | Very poor | FHA with 10% down; limited lenders |
| Below 500 | Typically ineligible | Focus on credit repair before applying |
FHA Loans: The Best Option for Low Credit Scores
FHA loans are the primary path for buyers with credit scores below 620. The Federal Housing Administration insures these loans, which allows lenders to offer more flexible terms.
Minimum requirements:
- Credit score 580+: 3.5% minimum down payment
- Credit score 500–579: 10% minimum down payment
- Credit score below 500: Not eligible for FHA financing
Not all lenders will approve FHA loans down to the 500 minimum. Many set their own overlay requirements at 580 or 600. New American Funding is one lender known for working with scores as low as 500 on FHA loans. See our full FHA loan requirements guide for complete details.
VA Loans: No Minimum Score (For Eligible Veterans)
The VA does not set a minimum credit score for VA loans. Individual lenders typically require 580–620, but some work with scores below that threshold. For eligible veterans, active-duty service members, and surviving spouses, a VA loan is often the best option regardless of credit score. See our VA loan guide for eligibility details.
USDA Loans
USDA loans do not have a formal minimum credit score, but in practice, most lenders require at least 640 for automated underwriting approval. Manual underwriting (slower but possible) may work for scores below 640. USDA loans are limited to eligible rural and some suburban areas. See our USDA loan guide for property eligibility maps.
What Lenders Look at Beyond Credit Score
A low credit score does not mean automatic denial. Lenders also evaluate:
- Payment history: Recent on-time payments can outweigh an older low score
- Debt-to-income ratio: Lower DTI compensates for lower credit scores in underwriting
- Down payment size: More skin in the game reduces lender risk
- Employment stability: Two-plus years with the same employer or in the same field
- Cash reserves: Savings remaining after closing demonstrates financial stability
- Explanation letters: A documented reason for past credit issues (medical bills, job loss) can help
How to Improve Your Score Before Applying
Even a 20–40 point improvement can move you from one credit tier to another, changing your available loan options and rate significantly. Fast-impact strategies:
- Pay down revolving balances to below 30% of each card’s limit (below 10% for maximum impact)
- Dispute inaccurate items on your credit report (request free reports at AnnualCreditReport.com)
- Avoid closing old accounts, which reduces your average account age
- Do not open new accounts in the 6–12 months before applying
- Add yourself as an authorized user on a family member’s credit card with a long, clean history
See our credit score requirements guide for more detail on what moves the needle fastest.
Down Payment Assistance for Buyers With Lower Credit
Many state and local HFA (Housing Finance Agency) programs offer down payment assistance grants and second loans specifically for first-time buyers with lower incomes and credit scores. These programs often layer on top of FHA loans. See our down payment assistance guide for state-by-state resources.
Lender Comparison
| Lender | Est. Rate Range | Min Credit Score | Min Down Payment | Best For |
|---|---|---|---|---|
| LendingTree | Varies by lender | 580 (FHA) / 620 (conv.) | 3.5% (FHA) / 3% (conv.) | Comparing multiple offers at once |
| Rocket Mortgage | Competitive market rates | 580 (FHA) / 620 (conv.) | 3.5% (FHA) / 1% (ONE+ program) | Fast digital approval process |
| Better.com | Competitive market rates | 620 | 3% | Low-fee online experience |
| New American Funding | Competitive market rates | 500 (FHA) / 620 (conv.) | 3.5% (FHA) / 3% (conv.) | Buyers with lower credit scores |
Bottom Line
A credit score below 620 limits your options but does not eliminate them. FHA loans at 580+ with 3.5% down are the most accessible path. If you have more time, improving your score by even 20–40 points before applying can save tens of thousands over the life of the loan.
Compare lenders on LendingTree — includes lenders that specialize in FHA loans for buyers with lower credit scores.