Can I Get a Mortgage with a 590 Credit Score?

Are you hoping to buy a home but worried that your less-than-stellar credit score could derail your dreams? You’re not alone. Many homebuyers face credit challenges but still want to get mortgage financing and make their purchase a reality.

While a 590 credit score is considered poor to fair by most lenders’ standards, that doesn’t necessarily mean you’re completely out of luck. With the right strategy and loan programs, buying a home with a 590 FICO score is possible. But it will take some work.

I should know. When I was looking to buy my first place a few years ago, my score was in the same range. I’ll walk you through what I learned about getting mortgage approval when your credit isn’t the best. With some practical tips and the inside scoop on alternative mortgages, you can map out a plan to make your homeownership dreams happen even with less-than-ideal credit.

Why a 590 Credit Score Makes Getting a Mortgage Tough

Before we dive into solutions, it’s important to understand why poor credit makes getting a home loan so challenging. Knowing these key obstacles will help you overcome them.

Most Lenders Want Higher Scores

The first hurdle is that traditional mortgage lenders generally want to see better credit, usually at least 620 and often higher. Fannie Mae, a major purchaser of conventional home loans, requires a minimum 620 score for loans it will buy. Most lenders follow these standards. With a 590 score, very few lenders will work with you.

Seen as Higher Risk

Lenders view lower credit scores as a sign you’re at higher risk of defaulting on the mortgage. Whether or not that’s true, it makes them hesitant to approve you. Expect an uphill battle convincing any lender you’re credit-worthy if your score is under 600.

Won’t Qualify for Low Down Payment Programs

Many popular low down payment mortgage options like FHA and VA loans require minimum credit scores of 580 to 620. A 590 meets these thresholds but doesn’t leave much wiggle room if your score slips.

How to Improve Your Chances of Approval

Despite the challenges, there are ways to boost your odds of getting a mortgage with a less-than-stellar 590 credit score:

Scrub Your Credit Reports

The first step is getting copies of your credit reports from Equifax, Experian and Transunion. Review them closely for any inaccuracies that may be dragging down your score incorrectly. Getting mistakes removed can give your score an easy boost. Here’s how to dispute errors on your credit reports.

Pay Down Balances

High credit utilization ratios (balances compared to limits) hurt your score. Pay down card balances to decrease utilization. Getting each card below 30% of the limit can help.

Add Positive Rent Payment History

Many people don’t realize you can add your on-time rent payments to your credit file. Having a strong rental history can offset other issues. RentReporters and Rental Kharma offer this service.

Complete Credit Counseling or Education

Enrolling in credit counseling shows lenders you’re committed to improving your finances. Taking financial education courses can also help.

Save for a Larger Down Payment

The more you can put down, the less risky lenders see you. To get approved, you may need 10-20% or more. Aim to build your savings over time.

Alternative Mortgages to Get with a 590 Score

When your credit is less than stellar, you’ll need to look beyond conventional mortgages offered by prime lenders. Here are some options those with 590 scores should consider:

Loan Type	Overview	Pros	Cons
FHA	Backed by the Federal Housing Administration. Minimum 580 score required. Down payments as low as 3.5%.	– Lower credit score requirements – Small down payments	– Require mortgage insurance
VA	For veterans and service members. No minimum credit score. No down payment needed.	– No credit requirements – No down payment	– For veterans only
Subprime	Offered by specialty lenders to borrowers with poor credit. Tend to have high rates.	– Approve lower scores	– Very high rates and costs

While you may not think of FHA loans as “alternative”, they can be a good option for those with poorer credit because of their lower score requirements. VA loans are also worth exploring if you served in the military.

Just keep in mind that government-backed loans like these still require you to have some compensating factors to offset a 590 score. A good down payment, steady job history, or sizeable savings could help.

Should You Consider a Subprime Mortgage?

You may get offers for subprime mortgages tailored to borrowers with credit challenges. While tempting, their sky-high interest rates can make them very expensive over the long run. Weigh such options carefully – sometimes waiting and improving your credit is better than jumping into a pricey subprime loan you’ll later regret.

Partner with a Mortgage Broker

Here’s a little secret from my own experience – working with a mortgage broker may be your best bet when your credit score is on the lower side. Here are some key advantages brokers offer:

• Access to More Loan Programs – Brokers have relationships with dozens of lenders and can find loan programs you won’t easily find on your own. This opens up more possibilities for those with poor credit.
• Matchmaking Skills – An experienced broker knows which lenders are more open to borrowers with lower scores. They can advocate and make the case for why you are still a good risk.
• Insider Tips – Brokers are extremely knowledgeable about the mortgage process. They can guide you on ways to improve your application and boost your chances of approval.

Don’t rely on just checking with your local bank. A qualified independent mortgage broker may hold the key to getting your mortgage approved with a 590 credit score.

Should You Delay and Improve Your Credit?

As much as you may want to buy right now, taking some time to boost your credit above 620 could make the mortgage process much smoother.

Waiting even a year or two to improve your score could mean:

• Better Rates – Each 20 points can save 0.5% or more on your interest rate. That adds up to thousands over the loan term.
• Lower Fees – Lenders charge higher rates and fees to those with poorer credit to offset risks. Improving your score saves big.
• More Options – A better score gives you many more lenders and programs to choose from. More competition can result in the best deal.

No one wants to delay their homebuying dreams. But practicing patience to build your credit is sometimes the smartest financial move.

Give Yourself a Reality Check

Be realistic about what mortgage is doable right now and set a game plan to reach your home buying goals. Improving your credit score takes time but is well worth it.

The Credit Boosting Game Plan

If you decide waiting to improve your credit is best, here are key ways to start:

• First, get copies of your credit reports so you have all the facts. Knowing your full credit profile will allow you to target the key trouble areas.
• Reduce high balances on credit cards and other revolving credit accounts. Pay down balances below 30% of their limits if possible.
• Call each of your creditors and ask for lower interest rates. Reduced payments can free up cash to pay down principal balances quicker.
• Research adding positive rental payment history to your credit reports. Having this can offset negative items and boost your score.
• Avoid applying for new credit cards or loans. Adding new accounts now can lower your score. Let your reports age and grow stronger first.
• Consider contacting a reputable credit counseling agency for customized advice on improving your credit profile. They can help create a tailored game plan.

With diligent effort, you can add at least 30-40 points to your score within a year. That can be the boost needed to qualify for a mortgage and get the green light.

Patience and financial discipline now pay off hugely in the end. I’m living proof! Stay focused on your goal and a home of your own will be yours before you know it.

You’ve got this! Now let’s go raise that credit score. Your dream home is waiting!