A 592 credit score doesn’t disqualify you from a mortgage. It changes which loan you qualify for, how much you need for a down payment, and what the money costs you over 30 years. Those are three very different problems, and only one of them is hard to solve.
Here’s what actually happens when someone with damaged credit applies, based on how underwriting really works rather than how it’s usually described.
What lenders mean when they say “bad credit”
There’s no universal line. What exists is a pricing grid. Every lender publishes a matrix that maps credit score bands to interest rates and eligibility, and below a certain band the loan simply isn’t available from that source.
For conventional loans sold to Fannie Mae and Freddie Mac, that floor is 620. In practice, most banks add their own overlays on top and won’t touch anything under 640 or 660. Below 620, you’re in FHA, VA, USDA, or portfolio territory.
The score isn’t the whole story either. A recent foreclosure, a car repo, a charged-off card, or a tax lien all carry their own waiting periods that run independently of the number. FHA wants three years after a foreclosure and two after a Chapter 7 discharge. Conventional wants seven and four. Someone with a 700 score and a foreclosure eighteen months ago is not approvable, and no amount of credit repair changes that clock.
The loan programs that approve lower scores
FHA: the workhorse for damaged credit
FHA is where most bad credit mortgages get done. A 580 score gets you 3.5% down. Between 500 and 579, you need 10% down, which on a $260,000 house means $26,000 instead of $9,100. That gap is the single biggest hurdle for applicants in the 500s.
FHA is also more forgiving on the details. Collections generally don’t need to be paid off. Medical collections are ignored entirely. A disputed account is a nuisance rather than a dealbreaker.
VA: no official minimum at all
The VA doesn’t set a credit score requirement. Individual lenders do, and most land at 620, though a handful go to 600. If you have VA entitlement and a 610 score, you have options, just not at every bank on the corner.
USDA: rural, but useful
USDA guarantees 100% financing in eligible rural areas with a 640 typical minimum, occasionally 620. Income limits apply, and the property has to be in the right zone, but the zero-down structure is hard to beat.
Non-QM and portfolio loans
Banks and private lenders that keep loans on their own books set their own rules. Some approve down to 550, though you’ll pay for it: rates in the 8% to 11% range and larger reserves. These exist for people with strong income and messy credit history, not as a first stop. If you want a fuller breakdown of where each lender type draws its line, this guide to the minimum credit score to buy a house walks through it program by program.
Your score is one input. These three matter just as much
Two applicants with identical 605 scores can get completely different answers, and the reason is almost always one of these.
- Debt-to-income ratio. Total monthly debt payments divided by gross monthly income. Most programs cap around 43% to 50%, with automated approvals sometimes stretching into the mid-50s when everything else is clean. At 58%, you’re done regardless of score.
- Reserves. Cash left over after closing. Two to three months of mortgage payments in the bank turns a borderline file into an approvable one. Zero reserves with a 580 score is a decline.
- Loan-to-value. More equity means more room for the lender to absorb a loss. Putting 10% down instead of 3.5% can rescue a file that would otherwise fall outside the guidelines.
Card balances deserve special attention because they hit two of these at once. A $6,000 balance at a 24% minimum payment adds $150 a month to your DTI and pushes your utilization toward the ceiling, which drags the score down too. If that describes your situation, how lenders weigh high credit card debt explains which balances get counted and which get ignored.
What bad credit actually costs you
Pretending there’s no penalty would be dishonest. A 620 score typically prices somewhere between 0.5 and 1.5 percentage points above a 760 score. On a $250,000 loan, one point is roughly $160 a month, or about $57,000 across the full term.
Then there’s mortgage insurance. FHA charges 1.75% of the loan amount upfront, which on $250,000 is $4,375, usually rolled into the balance. The annual premium runs about 0.55% and, with 3.5% down, stays for the life of the loan unless you refinance. Conventional PMI drops off automatically once you reach 78% equity.
Those numbers are worth knowing before you sign, and so is the full picture of what a specific score band unlocks. This breakdown of buying a house with a 620 credit score lays out realistic monthly figures rather than ranges.
Why one 600-score file gets approved and another doesn’t
Underwriters are looking for reasons to say yes once the automated system spits out an approve-eligible finding. What separates the two files is usually documentation and pattern.
A strong low-score file tends to look like this: twelve months of cancelled rent checks or bank statements showing the payment leaving the account on time, a down payment that’s been sitting in savings for at least 60 days with a clear paper trail, one credit card or installment loan with a two-year history and no late payments in the last twelve, no new credit inquiries in six months, and a short letter explaining any collection older than two years.
When those pieces are in place, a 600 score is genuinely fine. The realistic approval picture at a 600 credit score is broader than most people expect, largely because of FHA.
What to fix in the 90 days before you apply
Some moves produce results fast enough to matter, and some don’t. Prioritise in this order.
Pay revolving balances down aggressively. Utilization is recalculated when your statement cuts, not when you pay. Dropping a $4,000 balance to $400 on a $5,000 limit can move a score 40 to 60 points in a single cycle. That’s the highest-return action available to almost anyone.
Leave old accounts open. Closing a card you’ve had for eight years shortens your average account age and cuts your available credit. Both hurt.
Stop opening new credit. A car loan or a store card three weeks before application can sink an otherwise solid file.
Ask about rapid rescore. A mortgage broker can submit proof of a paid-down balance and get scores updated in three to five business days instead of waiting a month.
Don’t dispute everything. Blanket disputes freeze the accounts, and many underwriters won’t count a disputed tradeline in the score calculation. If you’re disputing an accurate collection, you’re usually making things worse. The tactics that reliably shift the number are covered in more depth in how to improve your credit score to buy a house.
Choosing who to apply with
A retail bank officer can only offer what that bank sells. A mortgage broker works with dozens of lenders and knows which ones have the loosest overlays this month, which changes more often than most people realise.
Ask two questions on the first call: “Do you write FHA and portfolio loans?” and “What’s the lowest score you’ve gotten approved in the last 90 days?” The second one separates brokers who genuinely place bad credit files from those who say they do.
Get two or three Loan Estimates and compare the APR, not the rate, because fees hide there. Multiple mortgage inquiries inside a 45-day window are treated as a single inquiry by most scoring models, so shopping around costs you nothing.
One last thing worth doing before you call anyone: pull your three credit reports from AnnualCreditReport.com and read them. Roughly one in five reports contains an error significant enough to affect a score. Finding a collection that belongs to someone with a similar name, or a late payment reported on an account that was current, can be the difference between 3.5% down and 10% down without you changing a single financial habit.