Credit Score

What Is A Acceptable Credit Score – UPDATED GUIDELINES: USDA Credit Score Requirements

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UPDATED GUIDELINES: USDA Credit Score Requirements

When qualifying for a mortgage, everybody knows that your credit scores are critical and in today’s short video we will discuss USDA credit qualifying requirements along with the Credit Qualifying Requirements

Now, before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with the link below.
This free guide is designed to walk you through the process step-by-step and is a great tool for both homebuyers and Realtors alike.

As a starting point, USDA defines a credit score as follows:

“A credit score is a statistical number that evaluates an applicant’s creditworthiness based on their credit history. The credit score considers payment history, amounts owed, percentage of credit used, length of credit history, types of credit, and newly acquired credit.”

Additionally, the USDA Guaranteed Underwriting System (“GUS”) will determine the acceptable credit score to be used which depends on whether it is an Accept, Refer, or Refer with Caution underwriting recommendation.

These underwriting recommendations dictate the way we approve lenders and what minimum required documentation is needed for loan closing.

An Accept recommendation provides for streamlined processing and simply means that GUS has accepted the credit as is with no further credit score validation required. However, a GUS Refer, Refer with Caution, and Manually Underwritten loans require a more stringent review of the loan file along with a minimum credit score validation as follows:
“One applicant whose income and/or assets is used to originate the loan must have a validated credit score. This applicant must have two tradelines on the credit report that have been/were/are open for 12 months based on the date the account was opened as stated on the credit report. A validated score does not indicate the applicant has an acceptable credit history. A validated score confirms that one applicant has an eligible minimum credit history.”

Additionally, USDA guidelines state that the following tradelines are eligible to validate the credit score and may be open, closed, and/or paid in full:

• loans (secured/unsecured);
• revolving accounts;
• installment loans;
• credit cards;
• collections;
• charged-off accounts; and
• authorized user accounts where additional qualifying criteria has been met

In summary, in order to obtain USDA loan approval, minimum credit conditions will be required which includes having an acceptable credit reputation. Additionally, although USDA guidelines do not have a defined minimum credit score, lenders may establish minimum credit score requirements that must be met, so always check with your lender to determine what their USDA minimum credit scores are.

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