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What kind of home loan can I get with a 550 credit score?

Bad credit can sound really horrifying, but many misconceptions need correcting if we’re talking about home loans. For example, did you know that you can get a mortgage even if you don’t have a credit score? We’re not kidding! Just imagine what other possibilities are out there if you do have a credit score, no matter where you are at the moment.

So you have just received your credit report, and you’re wondering if it’s possible to get a home loan even with a 550 credit score. We’re here to tell you that you can! However, there are many things you have to understand about mortgages and how your credit standing affects your chances. If you are willing to listen and have an open mind, you’ll be glad to know that we have tons of advice to share with you in this article.

Keep reading!

Credit Scores and Mortgages

Credit scores are undoubtedly important for many aspects of our life. However, depending on how high or how low your credit score can be, you might be denied a smartphone plan or even a job at a company.

While credit scores can definitely reflect a general observation of your most recent financial behavior, it is still what it is: a number. Keep in mind that some of our financial decisions can be affected by things that are out of our control. Even if you really want to pay that bill, for instance, you’ll absolutely have to postpone it if you run into a medical emergency or a similar kind of situation.

Credit can be a gatekeeper for our essential needs, which is why it’s an excellent thing that the government is maintaining windows of opportunities for people through the existence of government-backed loans. Since you have a credit score of 550, this does fall under the poor range on the FICO Score scale. However, if you really want to buy or refinance a house, you can still do so through the following loan options.

Home Loan with 550 Credit Score

For a 550 credit score, there can be a limited number of options, but you can definitely still qualify as long as you have the determination and the perseverance.

Here are the two government-backed loans that can help you move into that dream home you are longing for.

FHA Loan

Let’s begin with the mortgage guaranteed by the Federal Housing Administration.

FHA loans are mortgages meant for first-time home buyers. But anyone who meets its credit score requirements is welcome to apply.

The minimum credit score actually needed to qualify for a mortgage through the FHA is 500, provided you have the capacity to make a 10% down payment. If you can put in a bit of effort on your credit score and increase it up to 580, you can secure an FHA loan for as little as a 3.5% down payment. This is a great deal! However, take note that the lower the down payment you make, the higher interest you will pay for in the long run.

When you take on a mortgage and you keep a good habit of paying monthly without missing a deposit, there’s a perfect chance you can boost your credit score after a few months. Later on, this can help you refinance to snag a better interest rate to lessen your overall costs.


Believe it or not, there is actually a mortgage loan type that doesn’t have minimum credit score requirements. Again, we’re talking about the USDA loan program. This type of loan exclusively targets people living in or planning to buy a house in a rural area.

Another unbelievable thing about USDA loans is that, unlike FHA loans, they don’t require a minimum deposit. So if you can get approved, you have to worry about closing costs and recurring monthly payments.

They say that if you have a credit score of 640 or better, you can get approved much faster because of automated underwriting. With a 639 or lower credit score, you’ll have to go through manual underwriting so that mortgage lenders can get into the details of your financial circumstances. This is really to make sure you are not a habitual defaulter. They want to know the factors out of your control that gave you bad credit, which can be implied in your credit report.


Keep in mind that these will require you to buy a house that will become your primary residence when you avail of either of these home loans. You can’t buy an investment home or a vacation house if this is what you’re planning. You will have to show proof that this house will truly be your home.

Working on Your Credit

Debt is not for everyone. In fact, some people will go so far out of their way to make sure they are not racking up debt. Unfortunately, this is a tough road to take with not many benefits, obligating you to pay in cash all the time and using more unorthodox ways of borrowing money. The bad news is, for many people, including those who would prefer to stay out of debt, emergencies can happen at any time. And if you don’t have any credit history to show lenders, it can be so much harder and a lot more expensive to borrow the money you absolutely need.

Hear us out. You must work on your credit. Regardless of whether you’re considering a car or home purchase soon, it’s better to be ready for such an eventuality. However, we also recommend you don’t rest on your laurels, no matter how low or high your credit score gets. Credit scores can change so fast. A higher credit score will not only give you more savings, but it will also give you peace of mind that’s very valuable during these times.

Ways to Boost Credit

1 – Get a secured credit card

If you have a 550 credit score, chances are you probably have trouble getting approved for credit cards.

The bad news is, each time you make a credit card or loan application, points are shaved from your credit score because lenders will make hard inquiries, which will show on your report. Of course, you don’t want to be making a lot of these, but to improve your credit, you will need to have multiple lines of credit under your name that will eventually impress mortgage lenders enough to give you a loan.

We highly recommend you consider getting what’s called a secured credit card. To get this, you will have to make a savings or time deposit at the bank where you’ll be applying for a card. You won’t be able to withdraw these funds because they’ll be used as collateral if you turn out to be a delinquent payer. But you can return to the bank in as fast as 6 months to see if you can upgrade your card to a regular one so you can finally get your money.

2 – Become an authorized user

This tactic will require you to rely on the trust of someone close to you, so we suggest checking if your parents or loved ones would be willing to help.

If you can find someone with a credit card and an exceptional FICO Score, you can ask them to put you down as an authorized user on their account. As the terminology implies, this means that you can be given access to their credit line, and you might even be issued your own card.

Whether you do or you do not actually use the card of your parent, sibling, or partner, whatever outstanding line items they have on their credit reports can eventually trickle to yours, improving your credit score at absolutely no cost!

3 – Check your report for errors

Just in case you got your report, and you were shocked to find out that you actually have bad credit, there is a sliver of a chance that there’s an error or two in your credit history pulling down your score. If this is the case, you have to do what you can for these mistakes to be stricken off your report, whether these are erroneous late payments or debts sent to a collection that you’ve already paid.

Sometimes, more serious inaccuracies can be found. One woman even successfully won a lawsuit against TransUnion to mix up her history with another woman just because their Social Security numbers were almost the same.

If you find an error or two in your credit history, here’s a good read on what to do as advised by the Federal Trade Commission.

Other Loan Options

To inspire you to keep working on your credit, here are some of the other popular mortgage types you may find on the market. All you’ll have to do to qualify for these is to increase your credit score by less than a hundred points!

Conventional Loan

If you can afford to make a larger down payment, and you don’t mind increasing your credit up to 620, we recommend looking into what’s called a conventional loan.

Government institutions do not back these mortgages, so if you make a less than 20% down payment, you will be obligated to pay for private mortgage insurance. However, with a conventional loan, you will be allowed to borrow more money than you might be approved for under an FHA loan. You will also be allowed to use this loan for an additional house or an investment property.

VA Loan

If you can be eligible, this is the absolute best type of mortgage you should get for a primary residence!

As it implies, VA loans are insured by the Department of Veterans Affairs, and that is why mortgage lenders are more willing to give better rates due to the guarantee of this government agency.

To qualify for a loan, you’ll need a credit score of 640 or better, but it’s going to be worth it because, with a VA loan, you don’t just get the best mortgage rates; you also don’t need to make a down payment! That’s a much more attractive deal than the one offered by a USDA loan, since this time, you’re not limited to where you can choose to settle down and call your home.

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And that’s all for today!

We encourage you to keep pushing your limits. However, even if you can already get an FHA loan, this doesn’t mean you should be content with this possibility when there are many better opportunities out there if you just knew where to look!

Remember, you may not have a lot of control over your past, which credit scores can reflect for the most part. But you definitely can control what you have in the present! We’re just here if you need more help, and we’ll always be rooting for you. Good luck!

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