CREDIT SCORE UNDER 580

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Credit Score Under 580?

If your credit score is below 580, purchasing a home or refinancing can seem almost hopeless with today’s mortgage market.

However, several lenders available through our eMortgage community do offer low interest rate programs for borrowers with credit scores less than 580.

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If your mortgage has been paid mostly on time over the past 12 months, (for example: not more than 29 days late), low interest rates would likely be available for you, same as if your score were actually above 580. If you had a time period during the past year that caused one or more late payments, you would need a strong explanation (“circumstances beyond your control”) in order to qualify for a reasonable interest rate program with a low credit score.   

During the first quarter of 2007,  580 credit score requirements started becoming the new recognized “cut off” for many mortgage programs.   Prior to that scores less than 500 were the cut off.

If you’ve been having trouble making your mortgage payments on time, and do not explain and prove “circumstances beyond your control”, programs rates tend to be effected by lender risk calculations.  These programs carry greater rates and closing costs.  

If your current mortgage is in foreclosure, there is a lender program that requires a minimum property value of $250,000, charges interest rates somewhere around 13%.  This program also has some substantial pre-payment penalties.

For many borrowers, a program like this might make sense.  In these cases it might be better to work on your credit with an experienced credit consultant to enhance your score; and then try to refinance.


1. If you are running out of time and don’t have time to work on your credit, such program might make sense.

2.  If the refinance would be paying off debt showing on your credit report, enough so that your credit score would increase above the 580 mark, and if you can temporarily handle the monthly payments then perhaps such program might make sense.  Nevertheless, one should keep in mind that enough equity would need to be remaining in the property to satisfy the pre-payment penalty upon paying this mortgage off. 

A frequent question coming up is about: Previous lender programs that once offered programs for homeowner credit scores under 580 which provided terms with more preferable rates a borrower’s mortgage payments were NOT showing up on their credit report. These programs seemed to have dried up and no longer known by our eMortgage community.   The lender underwriting rationale of these programs was as follows: 

There has been talk about these programs coming back.  At a quick glance, these underwriting guidelines did not make sense to some, in many ways they actually did make a lot of sense.   There are many people that pay their mortgage on time every month, but for other reasons have credit scores below 580. They pay their mortgage like clock work every month and have been doing so for years.

Only about 2% of the entire U.S. population have credit scores below 580.  The mortgage program creators simplified their life once again, and set a new cut off to compensate an ailing industry.

Moreover, the reason these programs may come back is:  If someone’s score is less than 580, but mortgage payments have been made on time, and if the mortgage is not being reported to credit, there is good reason to consider that homeowner’s case. This is because, if those timely mortgage payments were showing up on the credit report, they would become part of the mathematical algorithm that is used to calculate the credit score and the credit score would likely rise above the 580 mark.

If you are thinking about doing some work on your credit, consider this.  If the score is under 580; but you’ve for the most part, been paying your mortgage one time; and if the mortgage company is reporting you payments on your credit report, obviously, there are other things on the credit report causing the low score.   

Often you can focus on a few items for a quick enhancement to bump your score above 580.  Of course, repairing your own credit can also be an infuriating job.  Unfortunately, most folks are not aware of which items are most significant to correct; nor which can effectively be corrected.  There are various tools and informational web pages offered by the 3 major credit bureaus Experian, Equifax and Transunion that can help.  Having an experienced credit professional review you report is often a good idea.  You might want to seek some advice from a credit professional that understands your objectives; and whom may be able to pin point and help you correct a select few items for a simple push on your score to move it up above 580.


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