How Habitat Uses Credit Scores

Determining Homeownership Eligibility

Habitat for Humanity is committed to providing affordable housing solutions to families in need. One of the key aspects of this process is determining if a family is eligible to become a Habitat homeowner. Unlike traditional lenders, Habitat takes a more holistic and flexible approach when assessing credit scores and financial histories. Here’s how they do it:

1. Application and Initial Review

To begin with, families interested in Habitat homeownership start by submitting an application. This application includes detailed personal and financial information. Habitat uses this information to perform an initial review and understand the applicant’s financial situation.

2. Credit Check

Next, Habitat for Humanity conducts a credit check to review the applicant’s credit history and score. While traditional lenders often have strict credit score requirements, Habitat’s approach is more understanding. They recognize that many low-income families may have less-than-perfect credit due to various hardships.

3. Evaluating Credit History

Rather than focusing solely on the credit score, Habitat examines the credit report to understand the applicant’s financial behavior. They look for:

  • Payment History: Consistency in paying bills on time, especially rent and utilities.
  • Debt: The amount and type of debt, including any outstanding collections or judgments.
  • Public Records: Presence of bankruptcies, liens, or other legal judgments.

4. Income and Employment Stability

In addition to credit scores, Habitat evaluates the applicant’s income and employment stability. They ensure that the family has a reliable source of income sufficient to cover the mortgage payments and other living expenses.

5. Debt-to-Income Ratio

Furthermore, Habitat assesses the applicant’s debt-to-income ratio, which compares the applicant’s monthly debt payments to their monthly gross income. A manageable debt-to-income ratio indicates that the applicant can afford the mortgage payments without undue financial strain.

6. Financial Counseling and Support

If an applicant’s credit score or financial history is not immediately acceptable, Habitat often provides financial counseling and support. This counseling helps applicants improve their credit and financial situation to meet Habitat’s criteria in the future.

7. Ability to Pay

Additionally, Habitat ensures that the applicant has the ability to pay the affordable mortgage they will receive. This mortgage is typically interest-free and set at a rate that is manageable for the family, based on their income level.

8. Willingness to Partner

Moreover, Habitat looks for applicants who are willing to partner with them. This means committing to “sweat equity,” where the family invests time in building their home and other Habitat projects, and participating in homeowner education programs.

9. Final Decision

Finally, the final decision involves a holistic review of the applicant’s financial health, credit history, income stability, debt levels, and willingness to partner. Habitat’s goal is to select families who demonstrate both the need for housing and the ability to succeed as homeowners with their support.


By using a comprehensive and flexible approach to evaluating credit scores and financial histories, Habitat for Humanity aims to provide homeownership opportunities to families who might be overlooked by traditional lenders. Their goal is to help these families achieve stability and build a better future.