640 Middle Credit Score - Extremely Important

Date: April 15, 2013

USDA Rural Loans theoretically aren't credit score driven. Borrowers with no credit scores are even eligible for the loan. When evaluating a borrower’s credit, the USDA Underwriter is able to issue a "credit waiver" on all minor derogatory credit provided the borrower has a minimum 640 middle credit score. Borrowers with major credit issues such as bankruptcies, short sales, or foreclosures within the last three years will not be eligible for a USDA Loan regardless of the credit score.

If a borrower has a middle credit score less than 640, the loan request will be manually underwritten. As long as the borrower meets a more rigorous approval process they still may be eligible for a USDA Loan. Borrowers with a middle credit score less than 640 will need to ensure that:

Total debt-to-income ratio for their housing expense can't exceed 29% of the borrower's gross income and total debt load including the housing expense can't 41% of the borrower's gross income.
No credit card late payments within the last 12 months
No accounts placed in collections status with the last 12 months
All judgement must be paid off for at least 12 months
Verification of rent required

Borrowers with no credit scores are eligible as well, so long as there is no credit history, and alternate trade lines are available. Borrowers with no credit scores will be required to provide a verification of rent and three additional alternate trade lines such proof of payment of electric, gas, phone, or insurance payments.

Currently, borrowers with middle credit scores that are less than 620 are ineligible for USDA Financing based guidelines from USDARuralLoan.com end investors.

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