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FHA rules include guidelines for how the lender must review an FHA loan applicant's credit data. The lender is given clear instructions on how credit scores are used in the loan approval process.

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FHA Loan Articles

News and Updates for Homeowners

What You Need to Know About Credit Score Data

September 30, 2011 - FHA rules include guidelines for how the lender must review an FHA loan applicant's credit data. The lender is given clear instructions on how credit scores are used in the loan approval process. Knowing these rules can help put a borrower's mind at ease about how the system works and help you prepare your credit for review.

"When a credit score is available, it must be used to determine eligibility for FHA insured financing," according to the FHA official site. What does the FHA do with the actual score numbers? Changes to FHA loan rules mean the data is handled depending on when an FHA case number was assigned to the loan application.

For example, FHA insured loans for new purchase transactions with case numbers assigned on or after October 4, 2010; on FHA loan case numbers assigned on or after 10/04/2010, borrowers with a decision credit score of 580 or above are eligible for the maximum amount of FHA financing available.

Borrowers with credit scores between 500-579 are eligible for a maximum FHA loan of 90 percent LTV, which means the borrower pay the remaining ten percent of the price of the home out of pocket. That ten percent cannot be financed.

FHA rules state borrowers with credit scores of 499 and below are not eligible for FHA insured financing--for case numbers assigned on or after 10/04/2010.

That set of requirements may seem more strict than for previous years--for FHA loans with case numbers assigned on or before October 3, 2010, the FHA credit score rules state:

"When the decision credit score is:


  • 500 and above: Maximum financing
  • 499 and below: Maximum LTV 89.99%,/li>
When one borrower has only nontraditional credit and the other has a
decision credit score of less than 500, the maximum LTV is 89.99%"

FHA credit rules have gotten stricter, as you can see--what was acceptable a year or two ago is no longer so, but FHA loans still offer more forgiving terms and conditions than many conventional loans.