USDA's handbook, HB-1-3555, leaves the score floor to GUS and to each lender. GUS, the Guaranteed Underwriting System, is USDA's automated underwriting system, and it reads your score next to your payment history, debts, income and savings. When GUS returns an Accept, USDA doesn't require any separate check of the score. Many lenders still set their own USDA minimum, usually at 640.
What each score range means on USDA
| Credit score | What usually happens |
|---|---|
| 680 and up | GUS decides. On a manual approval, USDA can waive its ratios up to 32% housing and 44% total with one compensating factor |
| 640 to 679 | Meets many lenders' USDA floor. GUS decides, and manual approvals stay at 29% and 41% |
| Below 640 | No USDA cutoff, so approval depends on GUS and the lender's own floor. FHA 100% financing is the $0 down route from 580 |
| No score | Manual approval with nontraditional credit, held to 29% and 41% with no waivers |
The compensating factors USDA accepts for a ratio waiver are three months of house payments in savings after closing, two years with your current employer, a new house payment no more than $100 or 5% above what you pay now (whichever is less), or a home that meets current energy-efficiency standards.
A worked example: how 680 changes the approval
Jordan earns $6,400 a month gross, has $350 in other debts, and wants a $250,000 single-family home in a USDA-eligible area with $0 down. The 1% guarantee fee is financed, so the loan is $252,500 at a 5.75% rate. Property tax is 0.95% of the price a year and insurance is $283 a month.
| Monthly cost | Amount |
|---|---|
| Principal and interest | $1,473.52 |
| USDA annual fee (0.35%) | $73.65 |
| Property tax | $197.92 |
| Homeowners insurance | $283.00 |
| House payment | $2,028.09 |
Jordan's housing ratio is $2,028.09 divided by $6,400, or 31.7%. The total ratio is $2,378.09 divided by $6,400, or 37.2%.
- With a GUS Accept, the 31.7% housing ratio is approvable as is, at any score GUS and the lender accept.
- On a manual approval with a 680 score and three months of payments saved, the 31.7% sits under the 32% waiver ceiling, and the home is approvable.
- On a manual approval below 680, USDA's 29% housing ratio holds. That's a $1,856 house payment, which supports about $225,000.
On FHA 100% financing, the same $250,000 home has a house payment of about $2,024, a 31.6% housing ratio, well under FHA's 46.9% limit at a 580 score.
Credit events USDA looks at
Your score is one input among several. A Chapter 7 bankruptcy discharged, or a foreclosure, short sale or deed-in-lieu, within the 36 months before the loan goes to USDA needs a documented credit exception. Once 36 months have passed, USDA no longer treats it as adverse credit. Non-medical collections over $2,000 in total get paid, put on a payment plan, or counted at 5% of the balance as a monthly debt. Medical collections don't have to be paid.
Raising your score for USDA
- Pay card balances down. High balances against your limits pull scores down fastest, and paying them down is the quickest lift.
- Ask for a rapid rescore. After a payoff posts, the lender can update your credit report in days instead of waiting for the next statement.
- Build tradelines if you're thin. One borrower needs two accounts open 12 months for a validated score on a manual file.
- Use rent history. With no score, 12 months of verified rent plus one other account, such as a utility or insurance bill, meets USDA's nontraditional credit standard. Without rent history, it takes three accounts.
Run USDA and FHA side by side on any price with the price check tool. Call AAA Capital Funding at 888-601-8344 and we'll confirm the address is USDA-eligible and tell you which program approves you at your current score.