Trying to get USDA guaranteed loan

[Quitamae39]

Will like to start the process of getting a USDA guaranteed loan. Credit score is 629 and need 640. I have 25 late payment started during COVID until February of 2022. I been on time for last 9 months with 3 payment left. I have to collection 1 for $781 att and the other medical bill for $101. I have two credit card Fingerhut balance $11 and credit one $36. I had a personal loan but paid that off and credit score dropp 7 points. Any advice will help.

[Mortgage-Specialist]

It's true that most lenders require a 640 for USDA but it's just an overlay. It's definitely not a requirement 

[ShanetheMortgageMan]

I'd recommend you wait to apply until you've had 12 months of clean credit history.  If the most recent late payment/delinquent mark on credit was in 2/2022 then I'd wait until 2/2023, as underwriters want to see you've re-established credit since the delinquencies which is at least 12 months of no blemishes.  The extra 3 months of reporting should help get your score closer to the 640 level too, which as @Mortgage-Specialist pointed out is what a lot of lender's minimum score requirement is these days.  If the only active trade lines you currently have are the Fingerhut + Credit One accounts then I'd recommend you open 2 or 3 other credit cards, use them once and then pay them off, as you'll start activity on them and won't have any late payments reports which will further improve your scores.  Mortgage scores love revolving (credit card) accounts with low/no balances and no delinquencies.

[Quitamae39]

Ok I was thinking about applying around 3/2023 and what credit card would you suggest because I tried before getting the credit one card and always got denied 

[ShanetheMortgageMan]

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@Quitamae39 wrote:

Ok I was thinking about applying around 3/2023 and what credit card would you suggest because I tried before getting the credit one card and always got denied 

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I've found that secured credit cards, where you put down anywhere from $500 to $1,000 and that is used as your credit limit, are usually easier to qualify for.  Often you can get those through who you bank with.  I've also heard First Premier is one of the easier ones to get.  Beyond that that I'd recommend you ask the experts that hang around the Credit Cards, Credit Card Applications, Credit Card Approvals, and Rebuilding Your Credit sections here at the FICO forums as they should be able to offer more specific advice on who you'll have better luck getting approvals from.  

[Quitamae39]

Ok thanks