We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.
It is unlikely you could be approved for mortgage financing with that credit score at this time.
Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.
First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.
Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.
I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.
Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.
The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.
The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.
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Attached are the underwriting guidelines from USDA. There is no "minimum score", however below 620, there has to be specific documentation provided. "Statistically, borrowers with credit scores below 620 demonstrate a higher likelihood of default and therefore, lenders should evaluate loans carefully and be cautious of layered risk in addition to the lower credit score. For example, a ratio waiver should be avoided unless strong compensating factors are present. In addition, lenders should be cautious when applicants have no rent or housing history to verify". Most lenders are conservative in their underwriting and I think it will be difficult for you to find a lender currently writing USDA insured loans below 640 in the upstate SC market. If you appreciate an answer, please give thumbs up. For the most helpful answer, please say thanks with a best answer click.