FHA loans are one of the most popular loans for homebuyers because they have various benefits such as:
But can your credit score affect the home-buying process for an FHA loan? Throughout this article, we’re going to walk you through everything you need to know regarding how your credit score affects FHA loans. We’ll also look at the different available down payments on FHA loans – to give you an idea of which ones you are eligible for.
The Federal Housing Administration (FHA) is a government agency that provides mortgage insurance on loans made by FHA-approved lenders. FHA mortgage insurance protects lenders against losses if a borrower defaults on their mortgage. Many homebuyers turn to FHA loans because they require lower down payments and credit scores compared to conventional mortgages. But there is some confusion around which credit scoring models FHA uses to qualify borrowers. So does FHA use VantageScore for mortgages?
A Brief History of Credit Scoring and FHA
Before we dive into whether FHA uses VantageScore let’s provide some background. FHA has been providing mortgage insurance since 1934 to promote affordable homeownership. For decades FHA relied predominantly on FICO credit scores to assess a borrower’s creditworthiness.
FICO scores, which range from 300 to 850, were once thought to be the gold standard for mortgage lending. Over time, though, worries grew that FICO scores left out too many creditworthy borrowers, especially those with short credit histories.
This set the stage for new competitors like VantageScore to emerge. Launched in 2006, VantageScore was developed jointly by the three major credit bureaus – Equifax, Experian, and TransUnion.
VantageScore tried to be more open by getting data from different places to make scores for people whose credit files were thin or nonexistent. It also matched FICO’s scoring range of 300 to 850 to make it easier for people to use.
FHA Approves VantageScore Mortgages
FHA used only FICO for credit scoring for more than ten years. But at the end of 2018, FHA suggested that lenders be able to use VantageScore 3. 0 in addition to FICO for certain loans. Then, in April 2019, FHA started letting VantageScore be used for FHA loans under certain conditions.
This was a major milestone that significantly expanded FHA’s credit scoring options beyond just FICO. Under Mortgagee Letter 19-04, FHA allowed lenders to use VantageScore 3.0 for:
- Manually underwritten loans
- Streamlined refinances without an appraisal
For both types of loans, borrowers must have a minimum VantageScore of 620. FHA placed additional restrictions on using VantageScore, including:
- No delinquent federal debt in the last 12 months
- No Chapter 7 or 13 bankruptcies in the last 2 years
- At least one VantageScore from the last 2 years
By approving VantageScore, FHA made it possible for millions more creditworthy people to get FHA mortgages. This aligned with FHA’s mission of affordable homeownership.
Current FHA Credit Score Requirements
Since initially approving VantageScore in 2019, FHA has expanded its permissible use for FHA loans. As of 2025, here are the current FHA credit scoring requirements:
Manually Underwritten Loans
For manually underwritten FHA loans, lenders can use either:
- FICO scores of at least 580
- VantageScores of at least 620
Borrowers must meet the additional criteria around bankruptcies and federal debt.
Streamlined Refinances
For streamlined refinances without an appraisal, FHA allows:
- FICO scores down to 500
- VantageScores as low as 540
Borrowers must have an existing FHA loan and meet FHA’s refinance seasoning requirements.
Automated Underwriting Systems
For loans run through FHA’s Total Mortgage Scorecard automated underwriting system, FHA requires:
- Minimum FICO scores of 580
At this time, FHA does not permit VantageScore models for loans processed through its automated system. Only FICO scores are accepted.
The Benefits of FHA Using VantageScore
FHA’s adoption of VantageScore provided several notable benefits:
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Increased homeownership opportunities – By scoring consumers with limited credit histories, FHA expanded access to mortgage financing to millions more underserved families.
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More competition and choice – Having both FICO and VantageScore as options prevents overreliance on a single scoring model and encourages competition and innovation.
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Consistent underwriting standards – Allowing lenders to use just one cutoff score (620+ for VantageScore) simplified underwriting compared to FICO’s multiple tiers.
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Minimal added risk – Analysis showed that loans to borrowers with VantageScores from 620-650 perform similarly to those with comparable FICO scores.
The Future of Credit Scoring at FHA
While FHA now permits VantageScore in certain scenarios, the majority of FHA loans still rely on FICO scoring models. But this could change in the coming years.
In 2022, FHA began assessing whether to allow additional VantageScore models for its automated underwriting system. FHA may also consider reducing its 620 VantageScore cutoff to expand approvals.
Regulatory pushes toward more modern scoring models could accelerate FHA’s adoption of VantageScore. This would align with FHA’s mission of providing sustainable homeownership opportunities to underserved communities.
As pressure mounts for housing finance to modernize its approach to credit scoring, we could see FHA lean further into VantageScore in the future. But for now, borrowers have more credit scoring options than ever before when applying for FHA financing.
Why Might You Get Rejected From an FHA Loan?
Although the requirements for an FHA loan are much lower than a conventional loan, you may still get rejected. The most common reasons for this include:
- Not looking at all of your credit scores: If you only look at your FICO score, but the lender also looks at your VantageScore, you need to make sure that your average meets the credit score requirements.
- Bad debt-to-income ratio (DTI): The lender will often look at your debt-to-income ratio even if you want to get an FHA loan with a bigger down payment. If you already have too much debt, they may turn you down.
- Overall not enough income: You may have saved up for a down payment, but the lender can still turn you down if your income is not enough. Ensure you consider this before applying.
Which Credit Score Is Used?
FHA-approved generally looks at your FICO score. However, if they get access to your other credit scores, such as your VantageScore, they will use the average of your scores.
Vantagescore Solutions could be your alternative to FICO scores
FAQ
Does FHA use VantageScore?
If mortgage lenders sell loans to Fannie Mae or Freddie Mac (also known as the GSEs), they will have to use the VantageScore 4. This is a big decision by the Federal Housing Finance Agency (FHFA). 0 model.
Do any mortgage lenders use VantageScore?
VantageScore is one of the credit scoring models that are widely used by lenders. Many lenders, including banks and mortgage providers, use VantageScore 3. 0 to help determine approvals, loan terms and more.
Is VantageScore usually higher than FICO?
VantageScore’s credit scores aren’t necessarily higher than FICO’s scores. VantageScore and FICO scores may differ, because they use different scoring models. Scores are also dependent on the information used to calculate them and when they’re calculated.
What credit score is needed to buy a $300K house?
To purchase a $300,000 house, the minimum credit score typically needed is 620 for a conventional loan. However, some loans like FHA loans may have lower minimums, like 580 with a 3. 5% down payment, or even 500 with a 10% down payment.