A bad credit score does not mean a mortgage is off the table. It just means the path takes more planning.
Most conventional lenders want a credit score of at least 620. Some loan programs go much lower than that. FHA loans, for example, can approve borrowers with scores in the 500s under the right conditions. The trick is knowing which lenders work with lower scores and what to bring to the table when you apply. Our companion guide on how to get pre-approved for a mortgage with bad credit digs into the lender-shopping side in more detail.
This guide walks through the steps that can move you from rejected to pre-approved, even with rough credit.
What Counts as Bad Credit for a Mortgage
Mortgage lenders typically group credit scores into rough tiers:
- 740 and above: excellent. Best rates and most options.
- 670 to 739: good. Strong odds for conventional loans.
- 620 to 669: fair. Still approvable for conventional, often at higher rates. See can you get approved for a mortgage with a 620 credit score for the specifics.
- 580 to 619: poor. FHA loans become the main path.
- 500 to 579: very poor. FHA may still work with a 10% down payment.
- Below 500: approval is rare and limited to specialty lenders.
Lenders also look at your debt-to-income ratio, employment history, and cash reserves. A 580 score with a steady job and savings often gets approved while a 700 score with unstable income may not.
Step 1: Check All Three Credit Reports
Before talking to a lender, pull your credit reports from Equifax, Experian, and TransUnion. You can request a free report from each bureau once a week at AnnualCreditReport.com.
Review each report for:
- Late payments that were actually on time.
- Accounts that do not belong to you.
- Collections you have already paid.
- Duplicate listings of the same debt.
Dispute any errors directly with the bureaus. Corrections typically take 30 days, and removing an inaccurate negative item can raise your score quickly.
Step 2: Know Your Mortgage Score
Lenders typically use FICO 2, 4, or 5 for mortgage decisions. These versions can differ from the FICO 8 score most credit apps show.
If you only know your VantageScore or FICO 8, ask a loan officer to run a soft pull or use a mortgage-grade credit monitoring service. Mortgage scores often run 10 to 30 points lower than the score in your banking app.
Knowing the right number sets realistic expectations and protects you from hard inquiries with the wrong lender.
Step 3: Build Credit Before Applying
If your score is too low for the loan you want, give yourself 3 to 12 months to improve it before applying. A few moves typically work:
- Pay every bill on time. Payment history is roughly 35% of your FICO score.
- Pay down revolving balances. Aim for under 30% utilization on each credit card.
- Avoid new credit applications. Each hard inquiry can drop your score a few points.
- Keep old accounts open. Length of credit history helps.
Readers starting from the low end can follow our plan for getting a credit score up from 500, and those closer to the 700 mark may prefer the how to get a 700 credit score playbook.
For people with thin credit files, adding a credit-builder product can help. A Self Credit Builder Account reports to all three major bureaus and is structured around making fixed monthly deposits, which can help establish a payment history.
After 6 to 12 months of on-time deposits, many users see meaningful score gains.
A credit-builder account is not a magic fix. It is a tool for building a positive payment record over time, which mortgage underwriters value. If you want a broader 12-month plan for getting good credit, that guide pairs well with this one.
Step 4: Pick the Right Loan Type
Different mortgage programs have different score floors:
FHA Loans
Backed by the Federal Housing Administration. The minimum FICO score is typically 580 with a 3.5% down payment, or 500 with at least 10% down. Mortgage insurance is required for the life of the loan in most cases.
VA Loans
For eligible veterans, active duty service members, and surviving spouses. VA does not set a minimum score, but most lenders look for 580 to 620. No down payment is required.
USDA Loans
For properties in eligible rural areas. Lenders typically want a 640 score for streamlined underwriting, but manual underwriting may allow lower.
Conventional Loans
The main path for scores above 620. Lower scores typically face higher rates and bigger down payments.
Non-Qualified Mortgages
Specialty loans that look at bank statements or assets instead of standard credit metrics. Rates and fees are typically higher.
Step 5: Save for Down Payment and Reserves
A bigger down payment can offset a lower credit score in two ways. It reduces lender risk, and it lowers the loan-to-value ratio, which often unlocks better rates.
For FHA loans, the 3.5% down payment can come from your own savings, a gift from family, or eligible down payment assistance programs.
Lenders also want to see cash reserves after closing. Two months of mortgage payments in savings is a typical target. Reserves signal that you can handle an emergency without missing a mortgage payment.
Step 6: Gather Your Documents
Mortgage pre-approval requires more paperwork than most loans. Have these ready before you apply:
- Two years of W-2s or 1099s.
- Recent pay stubs covering the last 30 days.
- Two months of bank statements for every account.
- Last two years of federal tax returns if self-employed.
- A government-issued ID.
- Records of any non-traditional credit, such as rent or utility payments.
Missing documents typically slow the process more than a low credit score. Organized files can help offset a weaker score.
Step 7: Shop Multiple Lenders
Different lenders apply different overlays on top of program guidelines. One lender may decline a 580 FHA application while another approves it.
Get pre-approval quotes from at least three lenders. Inside a 45-day shopping window, FICO typically counts multiple mortgage inquiries as a single hard pull, so your score takes only one hit.
Look for:
- Local credit unions, which sometimes offer flexible underwriting.
- FHA-approved lenders, which work with lower scores regularly.
- Mortgage brokers, who can shop your file across many lenders at once.
Step 8: Address Big Red Flags
Underwriters typically focus on a few major items:
- Recent late payments. Especially within the last 12 months.
- Collections and charge-offs. Pay or settle these before applying when possible.
- Bankruptcies. FHA usually requires 2 years from a Chapter 7 discharge.
- Foreclosures. FHA typically requires 3 years from a previous foreclosure.
Writing a brief letter of explanation for past credit issues can help. Lenders typically value context, especially for one-off events like medical bills or a job loss.
The Bottom Line
A low credit score is a hurdle, not a wall. FHA loans, careful credit building, and disciplined saving can all work together to put a mortgage within reach. Pre-approval often takes a few weeks of focused work on your file, followed by a clear plan for the next 6 to 12 months of credit improvement.
Start with your credit report, pick the right loan program, and shop your application to a few lenders. The path is slower than it would be with great credit, but it is real.
Frequently Asked Questions
What is the lowest credit score I can have for a mortgage?
FHA loans can approve credit scores as low as 500 with a 10% down payment, or 580 with 3.5% down. Most conventional lenders want at least 620. VA and USDA loans typically look for 580 to 640 depending on the lender.
How long does mortgage pre-approval take with bad credit?
Pre-approval itself usually takes 3 to 10 business days once documents are submitted. With bad credit, the lender may request additional documents or letters of explanation, which can extend the timeline by a week or two.
Can I get pre-approved with collections on my credit report?
Yes, in many cases. FHA allows pre-approval with open collections under certain conditions. Paying or settling collections before applying typically improves your odds and may lift your score.
How long does pre-approval last?
Most mortgage pre-approval letters are valid for 60 to 90 days. After that, the lender typically re-pulls your credit and updates your income documents to refresh the approval.
