When seeking financing for a new home, your lender will pull your credit as one way to assess the risk of lending you money. So, having a good credit score is key to ensuring you can have access to the lowest interest rates possible. But what if your credit isn’t great—or even that good? Can you still get a mortgage?

The short answer is yes, it’s quite possible to get a loan if your credit is only considered fair. But it depends on the type of loan you apply for as well as other factors. Let’s go over them.

Why Your Credit History is Important

Your credit is only one of the things that a lender looks at before approving your mortgage application, but it’s a pretty big one. How you handled your current and past debts is an indicator of how likely you are to pay your mortgage back and make monthly payments on time.

Most lenders verify your credit by pulling a report from all three credit bureaus – Equifax, Experian and TransUnion. Each of these bureaus gives you a three-digit score between 300 and 850 that is based on the information in your credit reports. Generally speaking, a credit score of 740 or higher is considered excellent, a score between 660 to 740 is good, and a score between 580 and 660 is fair.

The reality is that each lender may have a unique minimum credit score for getting a mortgage. If your credit score is below 580, however, getting a mortgage will be difficult. Even if you get approved, a lower score may mean you’ll be charged a higher interest rate to offset the lender’s risk that you may not be able to make your payments.

Loan Options When Your Credit Isn’t Great

If you’re worried about your score, keep in mind there are other factors that lenders consider before approving your loan. These include your income and how much money you have for a down payment. Being able to make a large down payment, for instance, can help compensate for a lower credit score.

However, there are mortgages available to borrowers who don’t have excellent credit or much savings. The most popular are government-backed loans. Because they are insured or guaranteed by the federal government, these loans are less risky for lenders. The three big ones are:

FHA Loans – FHA loans are backed by the Federal Housing Administration and have a minimum credit score that may vary by lender. FHA loans also require a down payment of only 3.5% of a home’s sales price, which makes them great for first-time homebuyers who don’t have much savings. To learn more about FHA loans, go here.

VA Loans – VA loans are backed by the Department of Veterans Affairs and are available to military veterans and active-duty servicemembers. Minimum credit scores also vary by lender. VA loans require no down payment, but there are usually some out-of-pocket costs. To learn more about VA loans, click here.

USDA Loans – USDA loans are backed by the U.S. Department of Agriculture and are used to buy single-family properties in rural areas. Like VA loans, there’s no down payment requirement. However, most lenders will require a credit score of 640 or better—plus these loans are only available in certain areas.

Improving Your Score

If you’ve gotten turned down for a mortgage because of bad credit, there are ways to boost your credit score. One of the best is to pay down your credit card balances.

When scoring credit, the Credit Bureaus—TransUnion, Equifax and Experian—place significant weight on credit utilization, that is, how much revolving credit you’re using compared to your available high credit limit. If you have high card balances, it’s best to pay them down to within 30% of their limits or lower.

You can also ask credit card companies to increase your credit limits, which will lower your credit utilization rate. Unfortunately, paying down balances and increasing your card limits can take 30 to 60 days to show up on your credit report. But they will improve your chances of getting approved or getting a better rate.

Thinking about buying a home and not sure whether your credit will help or hurt your chances? Right By You Mortgage’s loan experts can help. Just give us a call at 1-877-552-2242 or contact us at inquiries@rightbyyoumortgage.com.