Medical Debt Collections being Removed from Credit Reports

Medical Collections, Credit Scores, and Getting Approved for a Mortgage in Kentucky

If you are shopping for a home loan in Kentucky and have medical collections on your credit report, you are not alone. A recent federal court decision reversed a rule that would have kept medical debt off credit reports and out of credit decisions. As a result, medical collections can now show up again on your credit report and may impact your credit score and mortgage approval.

This guide explains how the new medical debt landscape affects Kentucky FHA, VA, USDA, KHC, and conventional mortgage borrowers, and what you can do before you apply.

What Changed: Federal Medical Debt Protections Rolled Back

Earlier in 2025, the Consumer Financial Protection Bureau (CFPB) finalized a rule that would have:

• Kept medical debt off credit reports
• Excluded medical debt from credit scores
• Prevented lenders from using medical collections in credit decisions

The CFPB estimated that about 15 million Americans would have seen roughly $49 billion in medical debt removed from their records. However, the rule was immediately challenged in court. Under the new administration, the CFPB stopped defending the rule and agreed it should be blocked. A federal court then overturned it.

The net result is simple: medical collections can now be reported again and can be considered when you apply for credit, including a mortgage loan.

How Medical Collections Show Up on Your Credit Report

Medical collections typically appear on your credit report as collection accounts, often reported by a third-party collection agency rather than the original medical provider. Even if the original bill was small or related to an insurance dispute, the collection can still show as a derogatory item.

Depending on how recent and how many medical collections you have, you may see:

• Lower FICO scores
• More conservative automated underwriting findings (AUS)
• Requests for letters of explanation and documentation
• Additional conditions during underwriting

How Medical Collections Affect Mortgage Approval in Kentucky

Medical collections are not treated exactly the same as credit card charge-offs or auto repossessions, but they can still make a difference in whether you are approved and what terms you receive. Here is how they can impact different loan types in Kentucky:

FHA Loans

FHA guidelines are often more flexible with medical collections than with other types of debt, but they still matter. Too many recent medical collections can trigger:

• Manual underwriting instead of automated approval
• Closer review of payment history and explanations
• Requests for proof that any disputes or insurance issues have been resolved

Learn more about FHA guidelines here: Kentucky FHA Mortgage Loans

VA Loans

VA loans look at the overall picture: residual income, payment history, and the nature of your collections. One or two older medical collections may not be a deal breaker, but larger or recent medical collections can raise red flags and lead to extra documentation requirements or compensating factors.

Read more about VA loans: Kentucky VA Home Loans

USDA Rural Housing Loans

USDA loans are strict about overall credit history and payment patterns. Medical collections can hurt your USDA approval odds if they are recent, numerous, or combined with other negative items. Underwriters will want to see that the situation is under control and not ongoing.

Explore USDA options here: Kentucky USDA Rural Housing Loans

Kentucky Housing Corporation (KHC) and Down Payment Assistance

When you use KHC down payment assistance with FHA, VA, USDA, or conventional loans, both the first mortgage and the KHC program will review your credit. Medical collections do not automatically disqualify you, but they can affect the combination of score, DTI, and program eligibility.

Learn how KHC works with first-time buyers: Kentucky Housing Corporation (KHC) Programs

Conventional (Fannie Mae/Freddie Mac) Loans

Conventional loans tend to be more credit-score driven. Medical collections can drag down your score and cause you to:

• Miss program or pricing cutoffs
• Need a larger down payment
• Receive less favorable interest rates

Why Medical Debt Is So Common, Even With Insurance

Millions of Americans, including Medicare beneficiaries and people with employer plans, carry unpaid medical bills. Common causes include:

• High deductibles and co-pays
• Out-of-network charges
• Surprise emergency bills
• Insurance delays, denials, and disputes

For many families, this leads to:

• Using credit cards to cover basic expenses
• Draining savings accounts
• Falling behind on other bills
• Delaying or skipping needed medical care

What You Should Do Before Applying for a Mortgage if You Have Medical Collections

1. Pull your credit reports from all three bureaus so you can see exactly which medical collections are reporting and for how much.
2. Verify accuracy. Make sure the balances, dates, and providers are correct. Many medical collections come from insurance billing issues.
3. Resolve insurance disputes first. If the bill should have been paid by your insurance, work with the insurer and provider to correct it.
4. Consider settlement on smaller or older collections when it makes sense strategically. In some cases, paying or settling a medical collection can help your overall profile.
5. Prepare a clear letter of explanation for any major medical event or period of hardship that led to the collections.
6. Avoid adding new debt or opening new credit lines right before or during the mortgage process.

Frequently Asked Questions about Medical Collections and Kentucky Mortgages

Do medical collections still show on credit reports after the rule was reversed?

Yes. With the federal rule blocked, medical collections can be reported again and may show up as derogatory accounts on your credit report.

Will medical collections automatically stop me from buying a home in Kentucky?

Not necessarily. Approval depends on the number of collections, how recent they are, your overall credit profile, income, debt-to-income ratio, and the loan program you are using. Many buyers with medical collections still qualify, especially with FHA and VA loans.

Should I pay off all medical collections before I apply?

It depends. Paying off certain collections can help, but in other cases the impact may be limited. The best approach is to review your full credit picture with a knowledgeable Kentucky mortgage broker and develop a strategy that matches your goals and timeline.

What if the medical collection is due to an insurance mistake?

Document everything. Keep copies of bills, explanation of benefits (EOBs), and correspondence with your provider and insurer. Underwriters are more understanding when you can show that the collection came from an insurance dispute rather than from ignoring bills.

Can a local Kentucky mortgage broker help if I have medical collections?

Yes. A local, experienced mortgage broker can review your credit report, explain how specific medical collections will be viewed under FHA, VA, USDA, KHC, and conventional guidelines, and help you choose the program and timing that gives you the best chance of approval.

Next Steps: Talk Through Your Situation Before You Apply

Every borrower’s medical and credit story is different. If you have medical collections and want to buy a home in Kentucky, the smartest move is to review your situation early, before you make an offer on a home.

Reach out to discuss your credit, medical debt, and homebuying goals. We can look at your credit reports, run payment scenarios, and outline a game plan to get you mortgage-ready.

Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA
NMLS 57916 • EVO Mortgage NMLS 1738461
Call/Text: 502-905-3708
Email: kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com
Equal Housing Lender

Medical Collections & Kentucky Mortgage Approval

What You Need to Know in 2025

What Changed?

• Federal rule keeping medical debt off credit reports was overturned.
• Medical collections can now appear again.
• Lenders may use medical debt in mortgage decisions.

Impact on Your Mortgage Application

Credit Report Impact

• Lowers FICO scores
• Adds derogatory accounts
• Stricter automated findings

Underwriting Impact

• Extra documentation required
• Possible manual underwriting
• Stricter USDA & Conventional standards
• Can affect rate & down payment

What To Do Before You Apply

1. Pull all 3 credit reports and review for accuracy.
2. Verify accuracy — many errors are insurance-related.
3. Resolve insurance disputes first.
4. Consider strategic settlements with creditors.
5. Prepare a concise letter of explanation for lenders.

Free Medical-Debt Mortgage Review

Ready to explore your mortgage options?

📞 Call/Text 502-905-3708 📧 Email

Joel Lobb | Mortgage Loan Officer
FHA • VA • KHC • USDA • Fannie Mae
NMLS Personal ID: 57916 | Company NMLS ID: 1738461
EVO Mortgage | Equal Housing Lender

This website is not endorsed by the FHA, VA, USDA, or any government agency. It is an independent platform created to educate and assist homebuyers with expert advice and accessible tools.

How do collections and charge offs on the credit report affect a Kentucky VA Mortgage Loan Approval?

Kentucky VA Loan Guidelines: Collections, Charge-Offs, Judgments and Liens

Many Kentucky veterans are worried that old collections or charge-offs will automatically stop a VA home loan approval. In most cases, that is not true. The VA underwriter looks at the whole credit picture, not just one negative item, and wants to know whether you are a satisfactory long-term credit risk.

This guide explains how Kentucky VA lenders typically treat collection accounts, charge-offs, judgments and liens when you apply for a VA mortgage.

VA credit guidelines can be flexible, but every file is different. The best way to know where you stand is to have your full credit report reviewed by a VA-approved lender who understands Kentucky guidelines.

How VA Views Collection Accounts

VA does not automatically require every collection to be paid before you can close on a home. Instead, the underwriter reviews the type, age, size and pattern of the collection accounts and whether you have re-established good credit since those events.

Key points about collection accounts

• Isolated or low-impact collections (especially older medical collections) generally do not have to be paid as a condition of approval.
• All collections are still treated as part of your overall credit history, even if payment is not required.
• If the credit report shows a minimum monthly payment on a collection, that payment may need to be counted in your debt-to-income ratio (DTI).
• Borrowers with prior collections are expected to show re-established, on-time credit afterward.
• The underwriter documents the handling of collections on VA Form 26-6393, Loan Analysis, to explain why the negative history does not make the loan unacceptable.

When a Letter of Explanation is needed for collections

For many Kentucky VA loans, especially manual underwrites, the lender will ask for a short written Letter of Explanation (LOE) that covers:

• What happened that led to the collection
• What you did to resolve or address it
• What you are doing now to avoid the same situation in the future
• Whether you plan to pay it, settle it or leave it as is

The goal is to show that the collection is tied to a specific, understandable event and that your current behavior reflects responsible money management.

How VA Views Charge-Off Accounts

Charge-offs are accounts the creditor has written off and is no longer actively trying to collect. VA generally treats them differently than active collections.

Key points about charge-offs

• Charge-offs usually are not required to be paid for a VA loan approval.
• They are often ignored for DTI purposes since there is no active minimum monthly payment.
• The underwriter still looks at the circumstances and timing of the charge-offs to decide whether you have since re-established good credit.

Even when a charge-off does not need to be paid, it still contributes to the overall picture of how you have used credit in the past.

Debts That Must Be Paid Before a Kentucky VA Closing

Some items cannot simply be left unpaid because they affect title and the legal ability to record the new mortgage. These almost always must be paid or released prior to closing.

Judgments

• Civil judgments reported on credit or discovered in public records generally must be paid in full or have a documented, satisfactory repayment agreement in place.
• Judgments can attach to the property and impact title, so they must be resolved before recording the VA mortgage.

Liens

• Tax liens, child support liens and other recorded liens must be paid, released or otherwise cleared before closing.
• Federal debt issues are treated very seriously. Delinquent federal debt will usually stop a VA loan until it is resolved.

When VA Credit Issues Lead to Manual Underwriting

Not every VA file receives an Approve/Eligible recommendation through automated underwriting. When there are multiple collections, recent late payments or other risk factors, your loan may be manually underwritten.

On a manual underwrite, the underwriter will focus heavily on:

• Pattern of on-time payments over the last 12–24 months
• Stability of income and employment
• Overall DTI ratio and residual income
• Strength of the LOE around prior collections or charge-offs

Good, recent payment history can often outweigh older negative items if the rest of the file is strong.

Key Takeaways for Kentucky VA Homebuyers

• Most standard collections do not automatically have to be paid to qualify for a VA loan.
• Charge-offs are often ignored for DTI, but still reviewed as part of credit history.
• Judgments, tax liens and many federal debts must be cleared or resolved before closing.
• A clear, honest Letter of Explanation helps the underwriter understand what happened and why your situation is now stable.
• The best approach is a full credit review by a Kentucky VA lender who knows how to work within VA guidelines.

Request a Kentucky VA credit review

If you have collections or charge-offs and you are not sure how they will affect your VA home loan, I can review your credit report and give you a clear plan. Many veterans are closer to qualifying than they think once the file is structured correctly.

Joel Lobb (NMLS #57916)
Senior Loan Officer
Cell/Text: 502-905-3708
Email: kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com

More Kentucky VA Loan Resources

• Kentucky VA loan requirements and updates
• All VA loan articles for Kentucky veterans
• Start a Kentucky VA loan application

This website is not affiliated with any government agency, including the U.S. Department of Veterans Affairs (VA).
NMLS ID #57916 (www.nmlsconsumeraccess.org)

How Do Mortgage Companies Average the Score on All 3 Credit Reports?

How Mortgage Lenders Use All Three Credit Scores

Your credit score is a major driver in whether an automated underwriting system (AUS) such as Fannie Mae Desktop Underwriter or Freddie Mac Loan Product Advisor will approve your mortgage. Understanding how lenders interpret all three credit scores can help you prepare for FHA, VA, USDA, Conventional, or Kentucky Housing Corporation financing.

Why Mortgage Lenders Pull All Three Scores

Lenders use a tri-merge credit report that pulls information from the three national credit bureaus:

• Equifax
• Experian
• TransUnion

Each bureau uses a different scoring model, which is why your three numbers are rarely the same. These differences are normal and expected.

To learn more about how credit scores work, visit Credit Scores for Kentucky Mortgages.

Factors That Impact Your Mortgage Credit Score

Several behaviors influence how your scores are calculated:

• Payment history and recent late payments
• Credit card utilization levels
• Collections, charge-offs, judgments, and bankruptcy
• Length of credit history
• New credit and inquiries

For borrowers seeking FHA financing in Kentucky, these factors are critical because FHA scoring models weigh payment history heavily.

How to Improve Your Scores Before a Mortgage

Many people assume paying off every credit card boosts the score. In reality, mortgage scoring models reward active but responsible use of revolving credit.

• Lower your credit card balances to 30–45 percent of the limit
• Keep older accounts open to preserve credit age
• Avoid opening new accounts before applying
• Address any recent late payments or collections

For buyers preparing for a zero-down option such as a Kentucky USDA loan or Kentucky VA loan, maintaining strong and stable credit is essential for AUS approval.

How Lenders Select the Score Used for Approval

Mortgage lenders do not average your three scores. They use the middle score.

If your scores were 780, 776, and 790, the lender uses the middle score of 780.

For joint borrowers, lenders use the lowest middle score between both applicants.

Minimum Scores Required for Mortgage Programs

Different mortgage programs have different minimum credit score expectations:

• FHA: 580 for maximum financing
• VA: Lenders typically require 580–620
• USDA: 620 for automated approval
• Conventional (Fannie Mae/Freddie Mac): 620 minimum

Explore specific requirements for each program below:

• Kentucky FHA Loan Requirements
• Kentucky VA Loan Guide
• Kentucky USDA Zero-Down Program
• Mortgage Programs for Kentucky Homebuyers

External references for further reading:

• Consumer Financial Protection Bureau: Credit Scores
• MyFICO: How Credit Scores Work

How to get approved for a Kentucky Mortgage Loan with Bad Credit

Kentucky mortgage loans after credit challenges: your options and next steps

If you’ve had late payments, collections, bankruptcy, or other setbacks, you’re not out of the game. Kentucky homebuyers routinely qualify using the right loan structure, realistic timelines, and clean documentation. Below is a practical breakdown of FHA, VA, USDA, Conventional, and KHC down payment assistance—plus smart internal and external resources.

Program overview

FHA loans in Kentucky

• Potential approvals down to 500 with at least 10% down or 10% equity on a refinance.
• 580+ score typically enables 3.5% down payment.
• Gift funds and DPA allowed; flexible underwriting for limited credit depth.

Internal: FHA options in Kentucky | External: HUD

VA loans in Kentucky

• No VA-imposed minimum score; many lenders look for ~620+.
• $0 down and no monthly mortgage insurance for eligible Veterans/servicemembers.
• Residual income and overall credit re-establishment matter.

Internal: Kentucky VA loan guide | External: VA.gov

USDA loans in Kentucky

• 100% financing for eligible rural properties and households within income limits.
• No hard USDA minimum score, but most lenders prefer 620–640+.
• Location eligibility, income, and household size rules apply.

Internal: Kentucky USDA overview | External: USDA

Conventional loans in Kentucky

• 620+ can allow 3–5% down; below ~660, many lenders require at least 5% down.
• Best fit for borrowers with re-established credit and stronger reserves.
• PMI may be cancellable as equity grows.

Internal: Conventional loan insights | External: CFPB

Kentucky Housing Corporation (KHC) down payment assistance

• Pairs with FHA, VA, USDA, or Conventional when eligibility criteria are met.
• Income limits, purchase price caps, and underwriting rules apply.
• Strong option for first-time buyers with limited funds.

Internal: KHC DPA options | External: Kentucky Housing Corporation

Infographics

Kentucky Mortgage Expert

Apply Now: Apply for pre-approval

Credit improvement guide: Credit-repair steps before applying

Closing cost guide: Closing costs in Kentucky

Contact

Email: kentuckyloan@gmail.com
Call/Text: (502) 905-3708
Website: www.mylouisvillekentuckymortgage.com

EVO Mortgage • 911 Barret Ave., Louisville, KY 40204

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Joel Lobb • Senior Loan Officer • Kentucky Mortgage Loan Expert

EVO Mortgage • Company NMLS #1738461 • Personal NMLS #57916

Equal Housing Lender

Disclosures: Program terms, eligibility, and pricing subject to change without notice. Not a commitment to lend. All loans subject to credit approval, acceptable collateral, and underwriting conditions. Geographic, income, and property restrictions may apply (including KHC/USDA). This content is for informational purposes only and not legal, financial, or tax advice. Verify current guidelines with your loan officer.

6 Tips to Boost Your Credit Score for Kentucky Mortgage Loans (FHA, VA, USDA, KHC)

6 Credit Repair Tips for Kentucky Homebuyers

Improve Your Score for FHA, VA & USDA Loans

Your credit score is one of the most important factors in qualifying for a mortgage in Kentucky. Whether you're seeking an FHA loan, VA loan, USDA loan, or Kentucky Housing Corporation (KHC) financing, having solid credit can make the difference between approval and rejection—and between getting a competitive interest rate or paying thousands more over the life of your loan.

The good news? You don't need perfect credit to buy a home. By taking actionable steps today, you can improve your credit score and position yourself for success with mortgage programs designed specifically for Kentucky homebuyers.

This comprehensive guide covers six proven strategies to repair your credit, along with answers to common questions about credit requirements for each loan program.

1. Pay Your Monthly Bills on Time

Why This Matters Most

Payment history is the single largest factor in your credit score, accounting for approximately 35% of your FICO score calculation. Even one late payment can significantly damage your credit profile and stay on your report for seven years.

Action Steps

Set up automatic payments through your bank for minimum amounts due. For cards or loans you're actively paying down, establish calendar reminders for payment dates. Consider:

• Setting autopay on all utility bills
• Scheduling payments 2-3 days before due dates to avoid late fees
• Using banking apps that send payment reminders
• Maintaining a simple spreadsheet or calendar of all due dates

💡 Impact Timeline Consistent on-time payments can begin improving your score within 30-60 days, with more significant gains visible after six months.

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2. Reduce Credit Card and Loan Balances

Understanding Credit Utilization

Your credit utilization ratio—the percentage of available credit you're actively using—accounts for roughly 30% of your FICO score. Lenders view high balances as a sign of financial stress, even if you're making on-time payments.

The 30% Rule

Aim to keep your credit card balances below 30% of your credit limit. For even stronger results, target balances under 10%. For example:

• If you have a $5,000 credit limit, keep your balance under $500 (ideally) to $1,500 (acceptable)
• Multiple cards at 20% utilization look better than one card maxed out

Debt Reduction Strategy

Create a monthly budget that prioritizes debt paydown before discretionary spending. Consider the avalanche method (paying highest interest rates first) or snowball method (paying smallest balances first) depending on your motivation style.

💡 Realistic Timeline You can see score improvements from reduced utilization within 30 days of paying down balances, as credit card issuers typically report updated information monthly.

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3. Limit New Credit Inquiries and Applications

Hard Inquiries vs. Soft Inquiries

When you apply for new credit—whether a credit card, auto loan, or mortgage—a "hard inquiry" is added to your credit report. Too many hard inquiries in a short period signals financial desperation to lenders and can lower your score by 5-10 points per inquiry.

The Smart Approach

If you're shopping for a mortgage, group your lender applications within a 30-45 day window. Credit scoring models treat multiple mortgage inquiries as a single inquiry when they occur within this timeframe, minimizing damage to your score.

What to Avoid

• Opening new credit cards to boost available credit (counterintuitive and ineffective)
• Applying for multiple retail store cards
• Frequent new loan applications
• Signing up for new credit "just in case"

Limit yourself to opening no more than one or two credit accounts per year. New credit inquiries represent about 10% of your FICO score but can have an outsized negative impact when clustered together.

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4. Keep Old Credit Cards Open (Don't Close Them)

Why Length Matters

Your credit history length accounts for approximately 15% of your FICO score. Closing old accounts—especially your oldest ones—shortens your average account age and reduces the amount of available credit, both of which lower your score.

Best Practice

Keep all open accounts active, even if you're not using them regularly. For cards you've paid off or rarely use:

• Make one small purchase monthly (gas, coffee, subscription)
• Pay the full balance immediately
• Never let the account go dormant or face closure by the card issuer

The Exception

If a card carries an annual fee you can't justify and the issuer won't waive it, closing it is acceptable. However, prioritize keeping older, fee-free cards open to preserve your credit history.

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5. Request a Credit Limit Increase

Boost Your Available Credit Instantly

If you're consistently near your credit limit on one or more cards, requesting a credit limit increase can immediately improve your utilization ratio without requiring additional debt paydown.

How to Request

• Call your credit card issuer's customer service number
• Look for an online request option in your account dashboard
• Request a limit increase without a hard inquiry (some issuers accommodate this)

Important Consideration

This strategy only works if you avoid increasing your spending to match the new limit. The goal is to lower your utilization percentage, not to spend more money.

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6. Address Late Payments Before They Damage Your Report

Act Immediately If You Miss a Payment

If you miss a payment deadline, contact your creditor immediately—ideally within 30 days. If you have a strong payment history, the company may agree to not report the late payment to credit bureaus.

Damage Control

• Explain your situation honestly (temporary hardship, oversight)
• Request a goodwill adjustment or waiver of the late fee
• Get confirmation in writing if they agree not to report it
• Catch up on the balance as quickly as possible

Reality Check

Not all creditors will cooperate, but many will for long-time customers with otherwise good histories. The key is proactive communication rather than avoidance. Even if a late payment is reported, the damage is less severe if you immediately bring the account current. A late payment that remains unpaid for months causes far greater score damage.

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How Long Does Negative Credit Information Stay on Your Report?

Understanding the timeline for credit repair helps set realistic expectations.

Item Type	Duration on Report
Late Payments	7 years from the date of first delinquency
Charge-Offs	7 years from the original delinquency date
Collections	7 years from the original debt date
Chapter 7 Bankruptcy	10 years from discharge
Chapter 13 Bankruptcy	7 years from completion or dismissal
Foreclosure	7 years from the date of first missed payment
Hard Inquiries	2 years (but impact on score lessens after 12 months)

Key Takeaway: While negative marks remain for years, their impact on your score diminishes over time as you build new, positive credit history. A 7-year-old late payment affects your score far less than a recent one.

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Kentucky Mortgage Programs: Credit Score Requirements

Understanding credit requirements for different loan programs helps you plan your timeline.

FHA Loans in Kentucky

Can you qualify for an FHA loan with a 580 credit score? Yes. FHA loans are among the most credit-flexible programs available and are popular with Kentucky first-time homebuyers.

• Credit Score 580+: Qualify with just 3.5% down payment
• Credit Score Below 580: Some lenders approve with 10% down through manual underwriting
• Why FHA Works: Designed for borrowers with limited credit history or past credit challenges

VA Loans for Kentucky Veterans

The VA doesn't set a minimum credit score requirement, but most Kentucky lenders require 580-620 or higher. VA loans are exceptionally flexible for service members and veterans with credit challenges.

• Typical Requirement: 580-620 minimum (lender-specific)
• Advantage: Often available with no down payment and flexible credit guidelines
• Best For: Active-duty service members and veterans with less-than-perfect credit

USDA Loans in Rural Kentucky

USDA loans support rural homeownership with zero down payment financing and flexible credit terms.

• Credit Score 640+: Qualifies for automatic approval through Guaranteed Underwriting System (GUS)
• Credit Score Below 640: May qualify through manual underwriting with compensating factors
• Compensating Factors: Low debt-to-income ratio, significant savings, stable employment history

Kentucky Housing Corporation (KHC) Down Payment Assistance

KHC programs tie down payment assistance to FHA, VA, USDA, or conventional loans. Credit requirements align with the underlying loan program.

• Typical Minimum: 620 credit score for down payment assistance eligibility
• Programs Available: Up to 12,500 down payment assistance for qualified borrowers
• Important: Individual loan program requirements still apply alongside KHC eligibility

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How Long Does Credit Repair Take for Homebuyers?

The timeline depends on your starting point and credit challenges.

Scenario 1: Recent Late Payments, Otherwise Clean History

• Timeline: 3-6 months
• Strategy: Consistent on-time payments and reduced balances
• Expected Result: 30-50 point score increase

Scenario 2: High Credit Card Balances

• Timeline: 2-4 months
• Strategy: Aggressive balance reduction
• Expected Result: 20-40 point score increase per card paid down

Scenario 3: Collections or Charge-Offs

• Timeline: 12-24 months
• Strategy: Payment arrangement, dispute, or wait for aging impact
• Expected Result: Gradual improvement as items age

Scenario 4: Recent Bankruptcy

• Timeline: 24+ months
• Strategy: Perfect payment history, rebuild credit mix
• Expected Result: Significant improvement possible; lender options available

Bottom Line: Working with a mortgage professional early allows you to build a personalized timeline and accelerate your path to homeownership. Some borrowers qualify within weeks; others benefit from a 6-12 month strategy.

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Bankruptcy and Kentucky Mortgage Loans

If you're navigating bankruptcy, homeownership is still possible.

Chapter 7 Bankruptcy

• FHA Loans: Wait 2 years from discharge date
• VA Loans: Wait 2 years from discharge date
• USDA Loans: Wait 3 years from discharge date
• Conventional Loans: 4-7 year waiting period

Chapter 13 Bankruptcy

• May qualify after 12 months of on-time payments with court approval
• Must obtain court permission to take on new debt
• Some lenders work with borrowers still in active Chapter 13 plans

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Your Next Step: Create Your Credit Repair Strategy

Your credit score isn't permanent. By implementing these six strategies, you can meaningfully improve your financial position and qualify for Kentucky mortgage programs designed to help you achieve homeownership.

Whether you need to repair damaged credit or optimize an already-decent score, timing matters. Starting today gives you months of payment history to present to lenders.

Ready to Explore Your Mortgage Options?

As a Kentucky mortgage specialist with over 20 years of experience, I've helped more than 1,300 families secure the right loan program—even with credit challenges.

✓ Free Mortgage Application with Same-Day Approval

The first step is a conversation—no obligation, no pressure.

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Frequently Asked Questions

Can I buy a house in Kentucky with a 580 credit score?

Yes. With a 580 credit score, you may qualify for an FHA loan in Kentucky with just 3.5% down. If your score is below 580, some lenders may still approve you with a 10% down payment. VA and USDA loans may also work with flexible credit guidelines, but additional documentation or manual underwriting may be required.

How long after bankruptcy can I get a mortgage in Kentucky?

For Chapter 7 bankruptcy, wait 2 years from discharge for FHA and VA loans, and 3 years for USDA loans. For Chapter 13 bankruptcy, you may qualify after 12 months of on-time payments with court approval. Conventional loans require longer waiting periods.

What credit score do I need for a USDA loan in Kentucky?

Most lenders look for a 640 minimum credit score for USDA automatic approval. Lower scores may still be approved with manual underwriting, but stronger compensating factors (like low debt-to-income ratios or extra savings) are often required.

What credit score is needed for a VA loan in Kentucky?

The VA itself doesn't set a minimum score. However, many lenders in Kentucky require 620 or higher. Since VA loans are more flexible, they're often a good option for veterans or active-duty service members with less-than-perfect credit.

Does Kentucky Housing Corporation (KHC) require good credit?

KHC offers down payment assistance programs tied to FHA, VA, USDA, or conventional loans. In most cases, a minimum 620 score is required for KHC's down payment assistance, though individual loan program requirements still apply.

How long does it take to repair credit enough to buy a house?

It depends on your starting point. For some borrowers, 3–6 months of consistent on-time payments and reduced balances can significantly improve scores. For others with major derogatory items like collections or bankruptcy, it may take longer. Working with a mortgage professional early can help you build a personalized timeline and strategy.

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Contact Information

Joel Lobb
Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA

📧 Email: kentuckyloan@gmail.com

📞 Call/Text: 502-905-3708

🌐 Website: www.mylouisvillekentuckymortgage.com

🏢 Address: 911 Barret Ave., Louisville, KY 40204

Licensing Information

NMLS Personal ID: 57916
Company NMLS ID: 1738461
www.nmlsconsumeraccess.org
Equal Housing Lender | Mortgage Loans Only in Kentucky

Disclaimer: The information provided on this page is for educational purposes and does not guarantee mortgage approval. Not all products or services may be available to all borrowers. This is an independent platform created to assist Kentucky homebuyers and is not endorsed by the FHA, VA, USDA, or any government agency. For more information about loan programs and licensing, visit www.nmlsconsumeraccess.org.

Fannie Mae Removes Minimum Credit Score! What It Means for Kentucky Homebuyers (Conventional Loan Update 2025)

Breaking Update

Fannie Mae Removes Minimum Credit Score in DU — What It Means for Kentucky Conventional Mortgages

Effective for DU casefiles created on/after November 16, 2025

Fannie Mae has removed the 620 minimum credit score requirement from Desktop Underwriter® (DU®) for new loan casefiles. Instead of a hard cutoff, DU now evaluates your full credit profile. For Kentucky first-time homebuyers, this may unlock access to a Kentucky conventional mortgage even if your score was previously “too low.”

Key Takeaways for Kentucky Homebuyers

No hard 620 floor

DU now runs a comprehensive risk assessment of your overall profile—income, debts, payment history, reserves, property, and purpose—not just your score.

Still full underwriting

“No minimum credit score required” doesn’t mean automatic approval. You must meet standard credit, income, asset, and property guidelines. Lenders may apply overlays.

Timing matters

This applies to new DU casefiles created on or after Nov. 16, 2025. Older files keep old rules. Coordinate submission with your loan officer.

Pricing still risk-based

Rates and mortgage insurance depend on your total profile. We’ll compare conventional vs. VA, USDA, and FHA—and whether KHC down payment assistance helps.

Who Stands to Benefit in Kentucky?

• First-time buyers with scores below 620 but strong income stability and on-time housing payments.
• Borrowers with limited credit depth who can document compensating factors (reserves, lower DTI, verified rent, reduced utilization).
• Clients comparing total cost of ownership across conventional vs. FHA/VA/USDA options.

Pro tip: Before running DU, clean up reporting errors, reduce revolving balances, and assemble documentation (W-2s/1099s, paystubs, bank statements, ID, and housing history). This strengthens DU’s overall assessment even without a score floor.

Conventional vs. FHA, VA, USDA in Kentucky

Conventional (Fannie Mae)

Now no minimum credit score required in DU for new casefiles. Best fit when overall profile is strong and mortgage insurance costs are competitive.

Learn more at Fannie Mae

FHA

Often lower down payment and flexible credit, but includes mortgage insurance. Useful if pricing beats conventional for your profile.

Kentucky FHA Guide

VA & USDA

VA for eligible Veterans/Service Members—often no down payment. USDA offers zero down in eligible areas with income limits.

Kentucky VA Info • Kentucky USDA Guide

Action Plan for Kentucky First-Time Homebuyers

1. Free pre-check: Share your basic info and goals. We’ll map the best path: conventional vs FHA/VA/USDA + KHC.
2. DU scenario runs: We’ll run DU with the new rules and compare pricing and MI.
3. Documentation: Gather ID, income, assets, and housing history so we can move quickly to full approval.

Ready to see if a Kentucky conventional mortgage works for you—without a minimum credit score requirement in DU?

Call/Text 502-905-3708 • Email kentuckyloan@gmail.com • Office: 911 Barret Ave, Louisville, KY 40204

Start Your Pre-Approval

FAQs: No Minimum Credit Score Required in DU

Does this mean scores don’t matter anymore?

No. Scores still influence risk and pricing. DU simply removed the hard 620 gate for new casefiles—your full profile drives the decision.

Will my lender still require a certain score?

Some lenders impose overlays (internal minimums). We’ll shop your scenario with investors aligned to Fannie Mae’s update.

Can KHC down payment assistance pair with conventional?

Yes—if you meet program rules. We regularly compare KHC DPA with conventional, FHA, VA, and USDA options to find the best total cost.

When does this apply?

For loan casefiles created in DU on or after Nov. 16, 2025. If your file predates this, we can recreate the casefile under the new rules where appropriate.

Compliance & Disclosures: For informational purposes only. Not a commitment to lend or extend credit. All loans subject to credit approval, underwriting guidelines, investor overlays, and program/market changes. Equal Housing Lender. Joel Lobb, NMLS #57916. EVO Mortgage, NMLS #1738461. Licensed in Kentucky. Program availability, rates, and terms may change without notice.

Trademarks: Fannie Mae, Desktop Underwriter, and DU are registered trademarks of Fannie Mae. This site is not endorsed by or affiliated with Fannie Mae.

Internal resources: Credit Scores & Mortgage • VA Loans Kentucky • FHA Loans Kentucky • USDA Rural Housing Kentucky • KHC Down Payment Assistance

FHA loans are a popular option for Kentucky home buyers' with bad credit

FHA loans remain a top choice for Kentucky homebuyers with less-than-perfect credit 

Credit score:

* The minimum credit score for an FHA loan in Kentucky is 500 to 580 depending on your credit score and down    payment. However, some lenders may accept scores as low as 500 with a larger down payment (10% instead of 3.5%).

Debt-to-income ratio:

* Your debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income. Most lenders prefer a DTI below 50%, but some may allow up to 56.9%.

Down payment:

* The minimum down payment for an FHA loan is 3.5% of the purchase price.

Employment and income:

* You'll need to have steady employment for at least two years and sufficient income to cover your monthly mortgage payment.

* You'll also need to meet other requirements, such as having a valid Social Security number and homeowner's insurance.

If you have bad credit and are considering an FHA loan in Kentucky, it's important to shop around and compare rates from different lenders. You may also want to consider talking to a credit counselor to help improve your credit score before you apply.

Joel Lobb 

 Email - kentuckyloan@gmail.com 

 Call/Text - 502-905-3708

 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

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Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans