Securing a mortgage with bad credit may seem like an uphill battle, but it’s far from impossible. While a lower credit score can make the process more challenging, there are concrete steps you can take to improve your chances of approval and potentially secure better loan terms.
What Is Considered Bad Credit?
There’s no universal threshold that defines “bad credit,” but the lower your score, the harder it typically is to qualify for a mortgage. “Bad credit” generally refers to a credit history that includes negative events such as late payments, defaults, bankruptcies, or excessive debt.
Credit is most commonly measured by your FICO score. Here’s how the ranges break down:
| Score Range | Credit Rating |
| < 580 | Poor |
| 580 – 669 | Fair |
| 670 – 739 | Good |
| 740 – 799 | Very Good |
| 800+ | Excellent |
How to Get a Mortgage With Bad Credit
If you have poor credit, you’ll likely face additional obstacles when securing a home loan. Here are steps you can take to improve your chances:
1. Know Your Credit History
Before applying, check your credit reports and score. Understanding your financial standing helps you assess your likelihood of approval and anticipate potential rates. You can pull free reports from all three bureaus at AnnualCreditReport.com.
Keep in mind that online credit reports may not include the specific FICO score that mortgage lenders use, which is calculated differently from general consumer credit scores. Your bank or credit card company may offer a free score check as a starting point.
2. Improve Your Credit
Even small improvements to your credit score can meaningfully affect your loan terms. Make timely payments, keep credit card balances low, and avoid opening new accounts or taking on new debt in the months before applying. Consistent effort toward building your creditworthiness pays off over time.
3. Save for a Larger Down Payment
A larger down payment can help offset a lower credit score. Lenders may be more willing to approve borrowers who demonstrate financial responsibility through a substantial upfront contribution. The median down payment in 2023 was 15% overall — 8% for first-time buyers and 19% for repeat buyers, according to the National Association of Realtors.
4. Consider a Government-Backed Mortgage
Government-backed loans, including FHA, USDA, and VA loans, often have more flexible credit requirements and lower down payment minimums than conventional loans. If you meet the eligibility criteria for one of these programs, they can be an excellent option for borrowers with poor credit history.
Here’s a general overview of credit score benchmarks for each:
| Loan Type | Minimum Credit Score |
| FHA | 580 (program minimum); most lenders require higher |
| VA | No set minimum; lenders typically look for 620+ |
| USDA | No set minimum; lenders typically look for 640+ |
Note: VA and USDA loans have no official credit score requirement set by the agencies. The figures above reflect benchmarks commonly used by lenders. Most lenders — including Refi.com — apply stricter minimums. Refi.com requires a minimum of 620 for FHA refinances.
5. Get a Co-Signer
Adding a co-signer with a stronger credit profile can significantly improve your chances of approval. Just keep in mind that the co-signer is equally responsible for the loan — if you can’t make payments, the obligation falls to them.
6. Explain Negative Items on Your Credit Report
When applying for a mortgage, be prepared to address any negative items on your credit report. Demonstrating that those issues are in the past and have been resolved can help build lender confidence.
7. Work With a Mortgage Advisor
A mortgage advisor or HUD-approved housing counselor can offer personalized guidance based on your financial situation and help you navigate the application process more effectively — especially if your credit history is complicated.
8. Shop Around
Lenders use different criteria to approve applicants. Compare options, including online lenders, credit unions, and mortgage brokers, to find the best fit for your situation. Getting quotes from multiple lenders is the most reliable way to find competitive terms.
A Note on Lender Credit Score Requirements
When shopping for a mortgage lender, it’s worth comparing minimum credit score requirements across institutions. These vary by lender and loan type, and some lenders specialize in working with borrowers who have lower scores.
Keep in mind that a lender’s advertised minimum is just a starting point, your interest rate, down payment requirement, and overall terms will all be affected by where your score falls within their range. The best strategy is to apply with multiple lenders and compare Loan Estimates side by side.
Ready to explore your options? Start your application with Refi.com today and see what you may qualify for.
