FHA does allow non-traditional credit reports to be generated based on payment history from accounts that do not show up on your credit report. For instance, insurance premiums, child care services, school tuition (see more options at https://www.hud.gov/sites/documents/4155-1_1_SECC.PDF
page 1-c-13). The loan officer might be telling you that you don't qualify because unfortunately you got one score from a bureau. It would have been better to get no score at all. Some lenders won't let you get a non-traditional credit report to "cover up" derogatory items on your traditional credit report. So, I'm wondering if there are any "bad" accounts on your credit report that shows a 535 score, or if there's just no history, so the bureau just gave you bad score for that. In any case, show your loan officer the above mentioned FHA guidelines and see if they can generate a non-traditional credit report. If not, try another lender.