Common Questions About FHA Loans: Credit Scores
"I have a credit score of 536. Can I get an FHA loan? I applied for a conventional loan but could not get approved."
One thing that's important to remind borrowers of when it comes to questions like this--some wrongly assume that the FHA is responsible for loaning money. It is not. FHA loan standards are set in two places--one is the FHA loan rulebook, which states that a minimum credit score of 500 is required for consideration. But since the FHA does not lend the money for a home loan, the participating lender's own credit score requirement is also a factor.
This point is very important. To reiterate: the FHA does not loan money or disburse funds. Instead, it guarantees the home loans which are issued by a participating lender. The lender is responsible for processing, approving or denying the FHA loan applications it receives.
If the borrower does not meet minimum FHA standards, the loan application will be denied. If the borrower meets minimum FHA loan standards, but cannot meet the lender's additional requirements--which may include more stringent credit or income criteria depending on the loan and the situation--the loan may be denied.
FHA minimum credit scores are listed at 500 and above. Financial institutions can and often do require higher FICO scores. Among many lenders, the accepted basic minimum FICO score is 620 or better.
If you are considering applying for an FHA loan but know your FICO score is lower than 620, contact the FHA directly for a referral to a pre-purchase housing counselor who can give advice on how to improve credit scores and the overall chances of loan approval. Also, don't give in to the temptation to spend money on third-parties who offer to "repair your credit" for a fee. Contact the FHA and ask for a referral to an FHA approved housing counselor on how you can accomplish the same results yourself. Call the FHA directly for this type of assistance at 1-800 CALL FHA.
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