Fannie Mae No Minimum Credit Score: What it Really Means

Fannie Mae recently announced there will be no explicit credit score requirement for loans run through its automated underwriting system, DU, and the headline made a lot of noise. I want to cut through the clickbait: this change is mostly semantics. The automated system has always underwritten the content of the credit report, not the raw score itself. In practice, nothing meaningful changes for nearly all borrowers.

What Fannie Mae actually announced

The headline reads no credit score required. What Fannie Mae clarified is that DU will rely on the content of a borrower’s credit report rather than using a fixed numeric score as the sole basis for approval or denial.

How DU already works: content trumps the number

DU, or Desktop Underwriter, analyzes the credit report details: payment history, derogatory tradelines, collections, balances, and more. It is not simply making decisions based on a single credit score value. In practice the system historically behaved like this:

• If a score falls into low ranges (for example, around 619 or below) DU results in an automatic decline.
• If a score is comfortably above certain thresholds (for example, above 620 or much higher), DU will proceed to underwrite the loan using the report content.

So while DU might not be “looking at the score” as the only factor, the score is a reflection of the underlying report content—and that content is what really drives approvals and denials.

Why this change will rarely help borrowers

There are several reasons this announcement will not materially increase approvals for low-score borrowers:

• DU dislikes reports that produce low scores. If the report content is the kind that would generate a score under about 640, DU is unlikely to return an approval. The system evaluates the same negative items that produce low scores.
• Lenders maintain overlays. Individual lenders can and do set their own minimums and restrictions above Fannie Mae requirements. Even if DU returns a favorable result, a lender can decline based on its own policy.
• Pricing penalties. Borrowers with lower scores who do get approved will almost always face higher rates. A borrower with a 625 score will almost certainly pay significantly more than someone with a 750 or 800 score.
• FHA remains a practical alternative. For many borrowers with lower scores, FHA loans often end up being the better option because the government-backed product can offer more competitive pricing for higher-risk borrowers.

When this could possibly help — very rare cases

There is a tiny subset of situations where the change might matter. I would estimate this applies to a minuscule fraction of borrowers:

• The property is not eligible for an FHA loan.
• The borrower has a low score (for example, around 615) but can make a very large down payment, typically 25 percent or more.
• The borrower has substantial reserves after closing — enough to cover 12 to 24 months of mortgage payments even if they have no job.
• Derogatory tradelines on the report are old — generally two to three years or older — and recent credit activity is clean.

If all of those conditions line up, a DU decision based on the report content rather than a hard score cutoff could possibly be advantageous. That scenario is rare. For the overwhelming majority of borrowers, it changes nothing.

Why underwriting standards exist (a short history)

Before 2008, underwriting focused on report content over a rigid credit score floor, DU (and FHA) did not have a minimum credit score requirement pre-2008. That approach alone did not cause the mortgage crisis. A bigger driver was the combination of policy pressures, like Community Reinvestment Act considerations, and intense competition with government-backed products such as FHA. As FHA grew more aggressive, private lenders competed to serve higher-risk borrowers, and overall standards loosened in ways that did not hold up.

Standards matter. Underwriting tools that evaluate borrower risk help keep mortgage credit sustainable. I would not want Fannie Mae to further loosen meaningful underwriting standards simply to chase volume.

Bottom line

This announcement is mostly a headline. In reality, DU has always evaluated the content of a credit report. Lender overlays, pricing differences, and the actual content of your credit history will still determine loan outcomes. For most borrowers this will not change the path to approval or the rate offered. It is useful to know the nuance, but it is not something to get excited about unless you fall into a very narrow, specific scenario.

“No credit score minimum is just a headline. In reality, this change is not going to move the needle at all.”