Credit Score Requirements for a Kentucky USDA, Fannie Mae, VA, FHA Mortgage Loans

Credit Score Requirements

What’s the Credit Score?

Your credit score is a part of the package of information lenders use to decide whether or not they will lend you money or extend credit. Other factors include things like your employment history and income and their own internal scoring systems.

There are two primary credit scoring models you need to know about: FICO® and VantageScore. Each may be used to determine your creditworthiness: that is, how likely you are to repay your loan. Your score can influence your interest rate, length of loan, and even how much you can borrow.

Your FICO Score is based on information received from the three major credit bureaus, Experian, TransUnion, and Equifax.

Your VantageScore, meanwhile, was actually developed by the three major credit bureaus to compete with FICO.

Calculating Scores

Both scores use a range of 300-850. A higher score indicates to lenders that you are fiscally responsible and the risk of lending to you is low.

Influences on your FICO Score:

FICO Score Ranges

Source: Experian

FICO Fast Facts:

  • Is not influenced by current interest rates on loans you already have.

  • 45-day window for rate shopping before credit is affected.

  • Six months of credit history required to establish a FICO score.

  • Has a separate Auto Score specifically for car loans.

Influences on your VantageScore:

VantageScore Ranges

Source: Experian

VantageScore Fast Facts:

  • Does not factor in paid-off collections when calculating your score.

  • Late mortgage payments are weighted more than other late payments.

  • 14-day window for rate shopping before credit is affected.

  • Can produce a score just a month or so after credit line is opened.

The average FICO score is 711; the average VantageScore is 688.

What Will My Lender Use?

FICO is used by 90% of lenders, according to myFICO, and has been around since 1989. (VantageScore only hit the scene in 2006.)

If you’re not sure which scoring model a lender will use, just ask!

  • USDA loan: Most lenders prefer at least a 620
    The U.S. Department of Agriculture insures for low- to moderate-income homebuyers. The USDA does not set a minimum credit score requirement and does not require a down payment.
  • Conventional loan: 620
    Conventional loans aren’t insured by a government agency either, but they are covered by mortgage loan companies Fannie Mae and Freddie Mac. The down payment amount varies.
  • VA loan: Most lenders prefer at least a 580
    A Veterans Affairs loan is backed by the U.S. Department of Veterans Affairs and meant for military members and their spouses. These loans don’t require a minimum score or money down.
  • FHA loan: 500 (with 10% down payment) or 580 (with 3.5% down payment)
    FHA loans, those guaranteed by the Federal Housing Administration, are for higher-risk borrowers who have poor credit and little money saved for a down payment. The credit requirements can fluctuate based on how much of a down payment you can afford.Most lenders have overlays now wanting a minimum 620 credit score even for FHA loans.

Are you interested in seeing how your current credit score might affect a new mortgage? Let’s take a look together.

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708