USDA Loan Minimum Credit Score & Credit Requirements 2025
USDA loans are a great option for families looking to purchase a home in an eligible rural area. They allow borrowers to enter homeownership without requiring a down payment, and the USDA minimum credit score is typically around 620.
Meeting or exceeding these requirements improves your chances of loan approval. However, it’s important to understand that the USDA doesn’t enforce credit score requirements. Instead, these are set by the lenders themselves.
Key Takeaways
Most lenders require a credit score of at least 620 for a USDA loan.
Borrowers with a credit score of 640 qualify for automatic approval under the USDA's Guaranteed Underwriting System.
Lenders, not the USDA, determine credit score requirements. Borrowers with lower credit scores could still be approved.
If you don’t have a credit score, you can still get a USDA loan through non-traditional tradelines.
Lenders Choose The Minimum Credit Score
Many people might assume that the USDA sets credit score requirements for USDA home loans. Instead, the lenders offering the loans are responsible. Some lenders require borrowers to have at least a 620 credit score, while others require 640.
Credit scores of 640 are common because this is the minimum needed to qualify for computer-generated approvals using the USDA's software. This system helps automate the approval process, making things move more efficiently.
If your credit score is lower than 640 or you don’t have a credit score at all, don’t worry. You might still qualify for loan approval.
Compensating Factors
Even if your credit score is below 640, there is still a way for you to get approved for a loan. Because you won’t qualify through the software, lenders must manually underwrite your loan. As they’re doing this, they’ll look at factors beyond just your credit score.
Some of these factors include:
Cash reserves
Stable employment history
Low debt-to-income ratio
New mortgage payment less than your current mortgage or rent
These compensating factors give lenders more confidence that you can make your monthly mortgage payments. While it’s not necessary to have all four of these, the more you possess, the higher your chances are for approval.
A Higher Credit Score Can Mean Better Terms
Even though it’s recommended that you have at least a 640 credit score to guarantee loan approval, having a higher score is beneficial because it gives lenders confidence that you’ll be able to make timely loan payments. This makes you a lower-risk borrower, allowing you to receive a lower interest rate and better loan terms.
According to many experts, credit scores above 760 can help borrowers receive the lowest possible interest rates. However, having a great credit score won’t guarantee you the lowest rates. Lenders also want to see a decent-sized down payment and a low debt-to-income ratio.
What If You Don’t Have a Credit Score?
In the US, 49 million people don’t have a conventional credit score, and 28 million don’t have a credit file with any of the major credit bureaus. This makes getting a mortgage more difficult. However, with USDA loans, there’s a path to homeownership through non-traditional credit. If you’ve never had a loan, USDA lenders use alternative methods to understand your ability to repay a loan.
By using non-traditional tradelines, lenders want to see 12 months of on-time payments through alternative sources such as:
Rent payments
Auto insurance
Renters insurance
Cell phone bill
Utilities
Car lease
Childcare
The requirements vary by lender, but showing that you can make other payments on time helps improve your odds of approval.
USDA Loans and Bankruptcy, Foreclosures, and Short Sales
Going through a bankruptcy, foreclosure, or short sale can be a stressful situation. It can also make owning a home again much more difficult. However, with a USDA loan, it’s possible.
If you’ve filed for either Chapter 7 or 13 bankruptcy, you must apply for a credit exception. If you’re not approved for an exception, you must wait the required period before being eligible for a new loan. The waiting period after a Chapter 7 bankruptcy is three years from the discharge and as little as one year for a Chapter 13 bankruptcy.
You also need to file for a credit exception if you’ve gone through a foreclosure or short sale. However, if you’re not given a credit exemption, you need to wait three years before applying for a USDA loan.
How USDA’s Credit Requirements Compare To Other Loans
If you’re comparing USDA loans to other mortgage products, you might wonder how the minimum credit score stacks up. The table below breaks things down.
Loan Type | Minimum Credit Score | Additional Factors to Consider |
USDA loans | 620 | Credit score must be 640 to qualify for the USDA's Guaranteed Underwriting System. |
FHA loans | 500 | Credit score of 580 requires a down payment of at least 3.5%. Credit scores between 500 and 579 require a minimum down payment of 10%. |
VA loans | 620 | Similar to USDA loans, lenders set the minimum credit score, not the VA. |
Conventional loans | 620 | Down payments less than 20% require private mortgage insurance. |
Tips For Raising Your Credit Score
If your credit score is below where it needs to be, spend some time improving your score before applying for a mortgage. This can help increase your chances for approval and improve the interest rate you qualify for. Below are some ways to boost your credit score.
Make Your Payments On Time
Missed payments can have the largest impact on your credit score. Make sure you’re always paying your bills on time. If possible, set up automatic payments to make things easier. If automatic payments aren’t available, set up a calendar reminder, so you never miss a due date.
Keep Your Credit Card Balances Low
Your credit utilization, or how much of your available credit you’re using, is another major piece of your credit score. Having a high balance at the end of your billing cycle can cause your score to fall. If you carry a balance on your cards, do your best to start chipping away at them as soon as possible.
Card issuers want your credit utilization to be no more than 30%. However, the lower you can get it, the better your credit score.
Ask for a Credit Limit Increase
The best way to lower your credit utilization ratio is to pay down your credit card balance. But if you want a quick way to lower it further, ask your credit card issuer to increase your credit limit. By keeping your balance the same and increasing your credit limit, you automatically lower the percentage of available credit you’re using.
Use a Secured Credit Card
If you’ve never had a credit card and don’t have a credit score, one of the best places to start is with a secured credit card. With a secured credit card, you are required to use a down payment, which serves as collateral. This also serves as your credit limit. As you make on-time payments each month, your card issuer passes this information along to the major credit bureaus. The result is a good start to your credit-building journey.
You Can Apply for a USDA Mortgage With Lower Credit
Don’t be discouraged if your credit is less than perfect. Government-backed programs like USDA and FHA mortgages were created for borrowers like you.
Find a reputable lender and apply. At the very least, you’ll get solid recommendations on how to improve your borrower profile.
