Credit Score Requirements for DSCR Loans

Your credit score plays a significant role in DSCR loan qualification and pricing, but not quite the same way it does with conventional mortgages. Here's everything you need to know about credit score requirements for DSCR loans in 2026.

Minimum Credit Score Requirements

Most DSCR lenders set minimum credit scores in this range:

Standard Minimums:

• Most lenders: 640-660
• Some lenders: 620
• Competitive pricing: 680+
• Best rates: 720-740+

Important: While some lenders advertise 620 minimums, actually getting approved at that score requires strong compensating factors:

• DSCR ≥ 1.30
• 25-30% down payment
• Significant cash reserves (12+ months)
• Clean payment history despite low score

In practice, 660-680 is the realistic minimum for most borrowers.

Credit Score Impact on Interest Rates

Credit scores directly affect your interest rate through "risk-based pricing":

Rate Adjustments by Credit Score Tier:

• 760+: Base rate (best pricing)
• 740-759: +0.125% to +0.25%
• 720-739: +0.25% to +0.50%
• 700-719: +0.50% to +0.75%
• 680-699: +0.75% to +1.00%
• 660-679: +1.00% to +1.50%
• 640-659: +1.50% to +2.50%
• 620-639: +2.00% to +3.00% (limited availability)

Real-World Example:

$300,000 DSCR loan, 30-year term

• 760 credit: 7.50% = $2,097/month
• 720 credit: 7.75% = $2,148/month (+$51/month, +$18,360 over 30 years)
• 680 credit: 8.25% = $2,254/month (+$157/month, +$56,520 over 30 years)
• 640 credit: 9.00% = $2,406/month (+$309/month, +$111,240 over 30 years)

A 120-point credit score difference costs over $111,000 in additional interest over the loan term.

What Credit Score Do Lenders Use?

DSCR lenders use your FICO score from all three credit bureaus:

Three-Bureau Credit Pull:

• Experian
• TransUnion
• Equifax

Middle Score Used:

If your scores are 695, 710, and 720, lenders use 710 (the middle score) for qualification and pricing.

If you have a co-borrower, lenders typically use the lower middle score between borrowers.

Example:

• Borrower 1 scores: 720, 730, 740 (middle: 730)
• Borrower 2 scores: 680, 690, 700 (middle: 690)
• Qualifying score: 690 (lower of the two middle scores)

Beyond the Number: What Lenders Review

DSCR lenders care about more than just your credit score number:

Payment History

Most Important Factor:

• Mortgage payment history (current and previous)
• Recent late payments (last 12-24 months)
• Collections and charge-offs
• Public records (bankruptcies, foreclosures, judgments)

Red Flags:

• Late mortgage payment in last 12 months: Major issue
• Late mortgage payment in last 24 months: Significant concern
• Multiple late payments on any account: Pattern of financial difficulty
• Recent collections: May require payoff before closing

What Helps:

• 24+ months of on-time payments on all accounts
• Paid-as-agreed mortgage history
• Low credit utilization (below 30%)
• Long credit history (10+ years)

Even a 680 score with perfect payment history can outperform a 720 score with recent late payments.

Credit Utilization

Lenders examine how much of your available credit you're using:

Optimal Utilization: Under 30% on all revolving accounts

Example:

• Credit card limit: $10,000
• Current balance: $2,500
• Utilization: 25% ✓ Good

High Utilization (Red Flag):

• Credit card limit: $10,000
• Current balance: $9,500
• Utilization: 95% ❌ Risky

High utilization suggests:

• Living paycheck to paycheck
• Potential cash flow problems
• Higher risk of default

Even with a 720 credit score, maxed-out credit cards raise underwriter concerns.

Recent Inquiries

Multiple recent credit inquiries can impact approval:

Shopping for Mortgages: Credit pulls within 14-45 days for mortgages count as single inquiry.

Other Credit Inquiries:

• Car loans, credit cards, personal loans: Each counts separately
• 6+ inquiries in 6 months: May indicate financial distress
• Excessive inquiries: Can result in denial despite acceptable score

Best Practice: Avoid opening new credit cards or financing cars for 6 months before applying for DSCR loan.

Derogatory Marks

Serious derogatory marks require waiting periods:

Bankruptcies:

• Chapter 7: 2-4 years after discharge
• Chapter 13: 2-4 years after discharge (1-2 years after dismissal with strong compensating factors)

Foreclosures:

• 3-4 years after completion
• Short sale: 2-4 years
• Deed-in-lieu: 2-4 years

Judgments and Liens:

• Must be paid and released before closing, or
• Payment plan documented and payments current

Collections:

• Medical collections under $5,000: Often ignored
• Other collections: May require payoff or payment plan
• Recent collections: Require explanation

Length of Credit History

Longer credit history demonstrates stability:

• 10+ years: Ideal
• 5-10 years: Acceptable
• 2-5 years: Thin file, may need stronger compensating factors
• Under 2 years: Limited credit, difficult to qualify

First-time credit users face challenges qualifying for DSCR loans regardless of score.

Credit Requirements by DSCR Ratio

Your property's DSCR influences credit score requirements:

Strong DSCR (1.25+)

Credit Requirements:

• Minimum: 640
• Competitive: 680+
• Best rates: 720+

Strong property performance allows more flexibility on credit.

Moderate DSCR (1.0-1.24)

Credit Requirements:

• Minimum: 660
• Recommended: 700+
• Best rates: 740+

Marginal property DSCR requires stronger borrower credit to offset risk.

Weak DSCR (0.75-0.99)

Credit Requirements:

• Minimum: 720
• Required: 740+ practically
• Best rates: 760+

Below-market DSCR demands excellent credit. Lenders won't combine poor credit with poor property performance.

Improving Your Credit Score Before Applying

If your credit score is below optimal, take these steps:

90-Day Credit Improvement Plan

Immediate Actions (Do Today):

1. Pull credit reports from all three bureaus (AnnualCreditReport.com)
2. Identify errors and dispute them
3. Pay down credit cards to under 30% utilization
4. Set up autopay for all accounts

30-60 Days Before Application:

1. Pay down revolving balances to under 10% if possible
2. Don't close old credit cards (reduces available credit, increasing utilization)
3. Avoid new credit applications
4. Pay any small collections under $500

60-90 Days Before Application:

1. Monitor credit score improvements
2. Dispute any remaining errors
3. Request "goodwill adjustments" from creditors for old late payments
4. Ensure zero late payments during this period

Results:

• Paying down credit cards: +20-50 points
• Fixing errors: +10-30 points
• On-time payments: +5-15 points per month
• Total potential: +50-100 points in 90 days

What NOT to Do

❌ Don't close old accounts: Reduces credit history length and available credit

❌ Don't pay off collections without strategy: Can reset the date and hurt score

❌ Don't open new accounts: Lowers average age of accounts, creates hard inquiries

❌ Don't max out cards to buy down payment: Destroys utilization ratio

❌ Don't ignore errors: Disputed errors often get removed, adding points

Credit Score Requirements by Borrower Type

U.S. Citizens

Standard requirements apply (640-660 minimum, 680+ recommended).

Foreign Nationals

Slightly Higher Requirements:

• Minimum: 660-680
• Recommended: 700+
• Best rates: 740+

Foreign nationals often face higher credit requirements because:

• U.S. credit history may be limited
• International credit less verifiable
• Collection more difficult if borrower leaves country

If you're a foreign national with no U.S. credit history, some lenders accept:

• International credit reports
• Alternative documentation (bank statements, reference letters)
• Higher down payments (35%+) to offset lack of credit

First-Time Investors

Standard Requirements:

• Same minimums as experienced investors
• Cleaner credit history expected
• Less tolerance for compensating factors

First-time investors typically need 680+ credit to be competitive, even with strong DSCR.

Credit Score and Other Compensating Factors

Lower credit scores can be offset by:

Larger Down Payments

Strategy:

• 640 credit + 20% down: Difficult
• 640 credit + 30% down: Possible
• 640 credit + 35% down: More likely

Extra 10-15% down payment can offset a 40-60 point credit score deficit.

Significant Reserves

Strategy:

• 660 credit + 6 months reserves: Marginal
• 660 credit + 12 months reserves: Better
• 660 credit + 18 months reserves: Strong compensating factor

Substantial cash reserves demonstrate financial stability despite credit challenges.

Exceptional DSCR

Strategy:

• 660 credit + 1.05 DSCR: Weak
• 660 credit + 1.40 DSCR: Much stronger
• 660 credit + 1.60 DSCR: Excellent compensating factor

Property that performs significantly better than minimum DSCR can offset credit concerns.

Multiple Investment Properties

Strategy:

• First property at 660 credit: Harder
• 5th property at 660 credit: Demonstrated track record helps

Successful management of existing rentals proves you're a good risk despite credit score.

Alternative Options for Low Credit Scores

If your credit doesn't meet DSCR minimums:

Option 1: Credit Repair and Waiting

Take 3-6 months to improve credit:

• Dispute errors
• Pay down balances
• Establish on-time payment patterns
• Wait for old negatives to age off

Sometimes patience is the best strategy.

Option 2: Add a Co-Borrower

Adding someone with stronger credit:

• Lender uses lower middle score
• But strong co-borrower can improve overall profile
• Co-borrower must be on title

Example:

• You: 640 credit
• Spouse: 740 credit
• Qualifying score: 640 (but stronger overall profile may help with underwriting)

Option 3: Hard Money Bridge Loan

Use hard money temporarily:

• Higher rates (10-14%)
• Credit score less critical
• 12-24 month term
• Refinance to DSCR once credit improves

Hard money gets you into the property; credit improvement gets you into permanent financing.

Option 4: Partner with Another Investor

Partner with someone who:

• Has stronger credit
• Provides credit qualification
• Shares equity and returns

You might contribute down payment or management expertise while they provide credit qualification.

Option 5: Seller Financing

Negotiate seller financing:

• Seller acts as lender
• Credit requirements flexible
• Pay higher than market interest
• Refinance to DSCR within 1-3 years

Seller financing bypasses traditional credit requirements entirely.

Monitoring Credit During the Loan Process

After applying, protect your credit:

Do:

• Continue making all payments on time
• Maintain credit card balances
• Respond to lender requests promptly

Don't:

• Open new credit accounts
• Make large purchases on credit
• Close credit accounts
• Let any payment go late

Lenders often re-pull credit before closing. Significant changes can jeopardize approval.

Frequently Asked Questions

What's the minimum credit score for a DSCR loan? Most lenders require 640-660 minimum, though some advertise 620. Realistically, 680+ makes you competitive for standard programs. Below 640 requires specialty lenders.

Can I get a DSCR loan with a 600 credit score? Extremely difficult. A few specialty lenders might consider with 40%+ down payment, exceptional DSCR (1.50+), and significant reserves. Hard money is more realistic for scores below 620.

Does my credit score matter if the property has great DSCR? Yes. Credit score always matters, though strong DSCR can offset moderately lower scores. A 1.60 DSCR property helps a 660 score qualify but won't overcome a 580 score.

Which credit score matters most: Experian, TransUnion, or Equifax? Lenders pull all three and use the middle score. All three matter equally. Don't assume your Credit Karma score (Vantage Score) matches your FICO score.

Can I use a co-borrower to improve my credit score? Not exactly. Lenders use the lower middle score between borrowers. However, a co-borrower with excellent credit can strengthen the overall application beyond just the score.

Will shopping for DSCR loans hurt my credit score? Minimally. Multiple mortgage inquiries within 14-45 days count as one inquiry. Shop multiple lenders within a tight timeframe to minimize impact.

How long do late payments affect my DSCR loan eligibility? Late mortgage payments in the last 12 months are serious red flags. Other late payments matter most if they're recent (last 6-12 months). Older lates (2+ years) have less impact.

Can I get a DSCR loan after bankruptcy? Yes, typically 2-4 years after discharge with credit rebuilt to 640+. The waiting period varies by lender and bankruptcy type. Stronger compensating factors can sometimes reduce the waiting period.

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Credit score requirements for DSCR loans are more flexible than many borrowers expect, but they still significantly impact qualification and pricing. While DSCR loans focus primarily on property performance, your credit score determines whether you qualify, what rate you'll pay, and how much you'll ultimately spend over the loan term. A 680+ credit score positions you competitively; 720+ puts you in the best tier. If your credit falls short, focus on improvement strategies, compensating factors, and alternative paths to property ownership while you build your score. The effort invested in improving your credit by even 40-60 points can save tens of thousands of dollars over your loan term.