Kentucky USDA and Rural Housing Credit Scores Guidelines



Kentucky USDA and Rural Housing Credit Scores Guidelines


Kentucky USDA Loan Credit Score Requirements and Guidelines 


This attachment illustrates the approach to reviewing credit history when a loan is
manually underwritten by an approved lender.

Credit score over 680: 

Perform a basic level of underwriting to confirm the
applicant has an acceptable credit reputation. Perform additional analysis if the
applicant’s credit history has indicators of unacceptable credit as noted in Paragraph 10.7
of this Chapter.

Credit score 679 to 640: 

Perform a comprehensive level of underwriting.
Underwrite all aspects of the applicant’s credit history to establish the applicant has an
acceptable credit reputation. Credit scores in this range indicate the applicant’s
reputation is uncertain and will require a thorough analysis by the underwriter of the
credit to draw a logical conclusion about the applicant’s commitment to making
payments on the new mortgage obligation. The applicant’s credit history should
demonstrate his or her past willingness and ability to meet credit obligations.

Credit score less than 640: 

Perform a cautious level of underwriting. 
Perform a detailed review of all aspects of the applicant’s credit history to establish the applicant’s
willingness to repay and ability to manage obligations as agreed. Unless there are
extenuating circumstances documented in accordance with this Chapter, a credit score in
this range is generally viewed as a strong indication that the applicant does not have an
acceptable credit reputation.

Little or no credit history: 

The lack of credit history on the credit report may be
mitigated if the applicant can document a willingness to pay recurring debts through
other acceptable means such as third party verification's or cancelled checks. Due to
impartiality issues, third party verification's from relatives of household members are not
permissible. Lenders can develop a Non-Traditional Credit Report for applicants who
do not have a credit score in accordance with Paragraph 10.6 of this Chapter.

unless otherwise stated in this Chapter.


Low credit score loan requests with scores 639 to 580 or below


A credit exception with supportive documentation
confirming the circumstances leading to derogatory credit that attributed to the low credit
score is required for all loans receiving a credit score of 639 or below. Circumstances
must meet criteria, as outlined in Section 10.8 of this Chapter to be eligible for a credit
exception.

Age of Credit Report or how long is my credit approved for?

Any credit report must: Not be more than 120 days old when the loan is closed;

Description Scoring Model Code Used for Fico Score 


In obtaining those scores, the following scoring models are recognized in the
Agency’s automated underwriting system in the order listed. Any model other than the
source noted below will not be recognized by the system.


Validating the Credit Score to Establish the Applicant’s Credit Reputation

GUS Accept loans do not require credit score validation.

NEW: Deferred loans are eligible trade lines to validate a credit score. The history of non‐payment,
increase of balance owned, etc. are reflected in the credit score.

NEW/Clarification: GUS Refer, Refer with Caution, and manually underwritten loan files are not
eligible for debt ratio waivers if: 1. There is not one applicant with a validated credit score using
traditional trade lines on the credit report or 2. The file requires non‐traditional trade lines.

Collection Accounts

Reminder: USDA does not require medical collections to be paid.

If the cumulative total of all non‐medical collections exceeds $2,000, one of the three listed
options in this section of the matrix must be met.
NEW: A credit exception is not required for GUS Accept (this is not new for GUS Accepts files, it is
provided as a clarification), Refer, Refer with Caution, or manually underwritten loan files when the
required payoff or monthly payment is included in the monthly debts.

Disputed Accounts

Comparison of 10.11 to Non‐Derogatory and Derogatory Disputed Accounts:


NEW: There are two sections for disputed accounts: Non‐Derogatory Disputed Accounts and
Derogatory Disputed Accounts. Below are some highlights of both account types.

Non‐Derogatory Disputed Accounts:

NEW: In addition to the current four methods to retain a GUS Accept without the need for a
downgrade, three additional criteria have been added to provide additional flexibility:
 The payment stated on the credit report is included in the monthly debts;
 A documented payment from the creditor is included in the monthly debts; or
 Five percent of the stated account balance on the credit report is included in the monthly
debts.
NEW: GUS Refer, Refer with Caution, and manually underwritten files must include one of the
following:

 The payment stated on the credit report;
 Five percent of the loan balance of the account; or
 A lesser amount documented from the creditor.

NEW: No credit exception is required for GUS Refer, Refer with Caution, or manually underwritten
loan files.

Disputed Derogatory Accounts:


NEW: Lenders may exclude the following disputed accounts to arrive at a cumulative total of
disputed derogatory accounts that must be considered in the monthly debts:
 Disputed medical accounts/collections;
 Charged‐off accounts;
 Disputed derogatory accounts that are the result of identity theft, credit card theft, or
unauthorized use when evidence is provided to support the applicant’s explanation; or
 Accounts of a non‐purchasing spouse in a community property state.

NEW: GUS Accept files with less than $2,000 in disputed derogatory accounts must include a
minimum monthly payment for each account:

 The payment stated on the credit report;
 Five percent of the balance of the account; or
 A lesser amount documented from the creditor.




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American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346

Text/call 502-905-3708


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