USDA Loans: Guide to Improving Your Credit Score

Worried that a bad credit rating will prevent you from qualifying for a USDA loan? Well, we have some good news for you. While the loan underwriter in charge of approving your loan will review your credit history – looking for things like paying your bills on time and defaulting on previous loans – a past history of subpar credit performance may not prevent you from qualifying.

Instead what the underwriter really is looking is the ability and willingness to pay your bills on time – including:

  • Working to reestablish your credit history over the past twelve months.
  • No more than one payment being more than 30 days overdue in the last twelve months.
  • All collection accounts are in good standing and nothing is being reported delinquent.
  • No foreclosures or bankruptcies in the last 36 months.
  • No outstanding judgments obtained by the United States in a federal court of Law (This is excluding any tax liens)
Keep in mind that USDA home loans are designed to help build the nation’s smaller rural communities, while also helping make the dream of home ownership come true for people who otherwise could not afford it. For this reason, there are many ways to prove that you are a good candidate, and you should never become discouraged by a less than stellar credit rating.


But My Credit Score is Really Low, Now What?

Even though a subpar credit rating does not always affect your eligibility, it can stand as an obstacle. And if your credit rating is below 620, you may want to start taking the needed steps to improve it.

The good news is that the FICO offers some clear cut advice on improving your credit rating.  Some of the key takeaways from their advice page include:

  • Request a copy of your credit report
  • Write to the reporting credit card bureau if you discover an error on your report
  • Reduce the number of credit accounts you have
  • Pay your bills on time
  • Make sure your accountants are in good standing
  • Keep your credit card balances low
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