If you think a low credit score automatically disqualifies you from buying a home, take a breath — it usually doesn’t. Plenty of first-time buyers close on homes with credit that’s far from perfect. What matters is knowing which loan programs are built for lower scores, understanding a few quick ways to improve your number, and going in with a plan. Here’s exactly how to buy a house with bad credit, and how to make it cost you as little as possible.
What counts as “bad credit” for a mortgage?
Credit scores generally break down like this: excellent (740+), good (670–739), fair (580–669), and poor (below 580). For a mortgage, you have real options once you’re around 580, and even below that in some cases. So “bad credit” rarely means “no options” — it means “fewer options and a higher rate.” The goal is to get into the best tier you can before you apply.
Loan programs that accept lower credit scores
| Loan type | Typical minimum score | Down payment |
|---|---|---|
| FHA | 580 (or 500–579 with 10% down) | 3.5% |
| VA (eligible veterans) | No set minimum; lenders often want ~580–620 | 0% |
| USDA (rural areas) | No set minimum; lenders often want ~640 | 0% |
| Conventional | 620 | 3% |
The clear workhorse for lower credit is the FHA loan. It was designed for exactly this situation and allows a 3.5% down payment with a 580 score. If you’re a veteran, a VA loan can be even more forgiving. For the full picture, see the credit score you need to buy a house.
How to raise your score fast (in 30–90 days)
Even a small bump can unlock a better loan or a lower rate. These moves work faster than most people expect:
- Pay down credit card balances. Your credit utilization (balance vs. limit) is a huge factor. Getting each card under 30% — ideally under 10% — can lift your score within a statement cycle or two. This is the single fastest lever for most people.
- Fix errors on your reports. Pull all three reports and dispute inaccuracies. A single wrongly reported late payment or collection can cost you dozens of points.
- Become an authorized user. Being added to a family member’s old, well-paid credit card can import their positive history onto your report.
- Don’t close old accounts. Length of history helps; keep old cards open even if you don’t use them.
- Ask for higher limits. A higher limit with the same balance lowers your utilization — just don’t spend more.
- Stop applying for new credit. Each hard inquiry dings your score, and new debt hurts your debt-to-income ratio.
- Never miss a payment. Payment history is the single biggest factor. Automate minimums so nothing slips.
Compensating factors: what lenders look at besides your score
Your credit score isn’t the whole story. Lenders weigh “compensating factors” that can offset a lower score, especially with FHA loans and manual underwriting:
- A larger down payment
- A low debt-to-income ratio
- Steady employment and income history
- Cash reserves left over after closing
- A clean recent payment history, even if older issues exist
Strong factors here can make the difference between a “no” and a “yes.” If your score is borderline, focus on strengthening these.
Manual underwriting and alternative credit
If your credit history is thin or your score is very low, ask about manual underwriting. Instead of relying purely on an automated score, an underwriter reviews your full picture — including alternative credit like rent, utility, phone, and insurance payments. A documented history of paying rent on time can carry real weight. This path takes more paperwork, but it opens doors for buyers the automated systems would reject.
The real cost of buying with bad credit
You can buy — but it isn’t free. A lower score usually means a higher interest rate, which raises your monthly payment and total interest over the life of the loan. It can also mean pricier mortgage insurance. On a 30-year loan, the gap between “fair” and “good” credit can add up to tens of thousands of dollars. That’s why it’s often worth spending a few focused months improving your score before you buy — the payoff can dwarf the effort. Run the comparison with our mortgage calculators and see our guide on getting a good rate.
A step-by-step plan
- Pull your three credit reports and scores.
- Dispute errors and knock down card balances.
- Set every account to autopay so you never miss.
- Talk to an FHA-savvy lender about where you stand.
- Explore down payment assistance — many programs work with lower-credit buyers.
- Reassess in 60–90 days; even a small gain can improve your terms.
Avoid predatory lenders
When your credit is low, you may attract offers that sound too good — no-credit-check loans, rent-to-own schemes with huge fees, or lenders pushing you toward risky adjustable terms. Stick with reputable lenders, get everything in writing, compare at least three offers, and be wary of pressure to “act now.” A legitimate FHA loan almost always beats a “special” bad-credit product dressed up with hidden costs.
Frequently asked questions
What is the lowest credit score to buy a house?
FHA loans allow scores as low as 500 with 10% down, or 580 with 3.5% down. Some lenders set higher minimums, so shop around.
Can I buy a house with no credit history?
Sometimes, through manual underwriting that uses alternative history like rent, utility, and phone payments. Ask an FHA lender about it.
Should I wait to improve my credit before buying?
Often yes, if a few months of work could move you into a better rate tier. Even 20–40 points can meaningfully lower your payment.
Does checking my own credit hurt my score?
No. Checking your own credit is a “soft” inquiry and doesn’t affect your score. Only lender “hard” inquiries have a small, temporary impact.
The bottom line
Bad credit is a speed bump, not a stop sign. Lean on FHA (or VA/USDA if you qualify), spend a focused month or two boosting your score, and strengthen your application with a solid down payment and low debt. Pair that with assistance programs, and you may be closer to owning a home than your credit score suggests. Start with our first-time buyer checklist to map out the path.