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How to Buy a House With Bad Credit

Learn what lenders look for and how to strengthen your chances.

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Updated · 3 min read
Abby Badach Doyle
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Amanda Derengowski
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You can still get a home loan if your credit needs work. But set reasonable expectations: With bad credit, you might need to make a bigger down payment or pay a higher interest rate to get the loan approved.
People with higher credit scores have more options. Depending on your number, it might be worth it to improve your credit first before buying a house.
Here’s how to face the challenges and make a plan.

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620

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4.0

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N/A

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0%

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4.0

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620

Min. down payment

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Can you buy a house with bad credit?

Yes, you can buy a house with bad credit — but it depends on your exact score and how well you handle money elsewhere. In general, a bad credit score falls below 630.
When you apply for a mortgage, lenders look at your whole financial picture. That includes:
  • Your credit score.
  • The size of your down payment.
  • Your debt and routine bills.
  • Your income and employment history.
If you have bad credit score, you can make up for it by having less debt or more money in savings. A higher down payment can improve your chances of approval, too.
» MORE: Try our credit score mortgage calculator

What is the lowest credit score to buy a house?

You need at least a 620 credit score to qualify for most mortgages, such as conventional loans. FHA loans, backed by the Federal Housing Administration, allow scores as low as 500. Still, most lenders prefer to see a higher score.
If your score is too low to qualify for a mortgage at all, you might have to postpone your house hunt for a while until you get in a better range.

Knowing and improving your credit

Credit scores are measured by two major companies, FICO and VantageScore. Each company has slightly different categories, but they both range from 300 (lowest) to 850 (highest).
FICO and VantageScore ranges are different but both span 300 to 850.
In general, here’s how credit score ranges affect your ability to get a mortgage:
  • 🚫 Credit scores below 500: It’s unlikely you’ll qualify for a home loan. Focus on building your credit first.
  • 🛑 Credit scores between 500-579: Your options are very limited, but you could qualify for an FHA loan with a down payment of 10%. 
  • ⚠️ Credit scores from 580 to 619: You can get an FHA loan with a lower down payment of 3.5%. Some lenders might approve your application, but others won’t. Expect to pay a higher interest rate.
  • ⚠️ Credit score of at least 620: More options open up around this point, including conventional loans. Depending on the rest of your financial picture, qualifying still isn’t guaranteed. Lenders still charge higher interest rates to borrowers with scores in this range.
  • ✅ Credit scores of 700 and up: Lenders are more willing to extend credit at this range. If the rest of your financial picture looks good, you’ll have many options to choose from. With a score of 740 or higher, you’ll qualify for the lowest interest rates.
» MORE: What’s a good credit score to buy a house?

Common options: Bad credit home loans

Here are some mortgage types to consider if you’re buying a house with bad credit.
  • FHA loans: You’ll find the most flexible credit requirements with an FHA loan. Scores of 500-579 can qualify with a 10% down payment. With a score of 580 or above, only 3.5% down is required.
  • VA loans: These specialty loans serve current and veteran military members and their spouses. The Department of Veterans Affairs doesn’t set a minimum credit score, but the lenders that offer VA loans do. The typical cutoff is 620, but some lenders accept scores in the 500s.
  • USDA loans: The U.S. Department of Agriculture backs these loans for homes in eligible towns and rural areas. Scores of 640 and above get faster approval. Lower scores require a full credit review.
  • Conventional loans: These loans are offered by private lenders (not backed by the government) and typically require credit scores of 620 or higher.
🤓 Nerdy Tip
Not sure where to start? See NerdWallet’s top lenders that offer home loans for bad credit. You’ll save money if you shop around. Get at least three estimates to make sure you’re getting the best deal.
» MORE: How credit score affects your mortgage rate

Can I buy a house with no credit?

It’s possible to buy a house without a credit score, but expect more paperwork and longer processing times. This process is known as manual underwriting.
Without a credit score, it’s harder for lenders to understand the risk of loaning you money. Instead, you’ll need to provide 12 months of history of making payments on time, such as:
  • Rent payments.
  • Insurance.
  • Utilities (such as water, electric, phone, internet or gas).
FHA loans provide flexibility for alternative forms of credit. With an FHA loan, you can prove your ability to make payments on time with proof of:
  • School tuition or childcare costs.
  • Car lease payments.
  • Medical bills that aren’t covered by insurance.
  • Rent-to-own payments, like for furniture or appliances.
  • Paying back money to a friend or relative (with documentation).
  • Regular deposits in a savings account.
Be prepared to provide documentation of your payment history, such as canceled checks, money order receipts and account statements. Instead of payment history, the lender may also accept a special report that looks at the health of your banking and investment accounts.
🤓 Nerdy Tip
If you’re not in a hurry, consider establishing a credit score before applying for a mortgage. Even a fair score can give you more options than no credit history at all. It can take three to six months of consistent activity to establish your first credit score.
» MORE: No credit score: What does it mean?

Tips to build your credit before buying a house

Raising your credit can take time. There’s no one quick fix, but small actions add up. Start by getting your free credit report and free credit score to know where you stand.
Then, fix any credit report errors that might be bringing down your score.
From there, try these steps to improve:
  • Pay bills on time.
  • Pay down debt, like credit card balances.
  • Ask for a higher credit card limit.
  • Hold off on opening new accounts.
  • Address any collections accounts.
» MORE: How to build credit fast
Something else to try: Get free or low-cost advice from a HUD-certified housing counselor, a housing expert with the U.S. Department of Housing and Urban Development. They can help you make a personalized plan to build your credit or recover from bankruptcy.
Remember, a low credit score isn’t a reflection of your character. It might just mean you had some financial stress, like unexpected bills or skipped payments during tough times. Or that your credit history is short. With a plan and some discipline, you can reach your goals.
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