Exhibit 10.2


                               FOURTH AMENDMENT TO
                                CREDIT AGREEMENT


     THIS FOURTH AMENDMENT TO CREDIT AGREEMENT ("Fourth  Amendment") is dated as
of May 16, 2005, by and among Hancock Fabrics,  Inc.  ("Borrower");  and Hancock
Fabrics of Mi, Inc., HF Merchandising, Inc., HF Resources, Inc., HF Enterprises,
Inc., Hancock Fabrics, LLC and HancockFabrics.com,  Inc.  ("Guarantors");  Union
Planters Bank, National  Association  ("Union Planters");  and BancorpSouth Bank
("Bancorp").

                                    RECITALS
                                    --------

     The parties hereto, along with Wachovia Bank, N.A.  ("Wachovia"),  executed
that certain Credit Agreement ("Credit Agreement") dated as of April 16, 1999.

     The Credit  Agreement  provided  for a  revolving  credit  facility  in the
principal amount of Sixty Million and No/100 Dollars ($60,000,000.00).

     The Credit  Agreement was amended by that certain First Amendment to Credit
Agreement  dated March 26,  2002,  by and among  Borrower,  Union  Planters  and
Bancorp (the "First Amendment").

     Pursuant to the First  Amendment,  Union Planters  agreed to serve as Agent
under the terms of the  Credit  Agreement,  the amount of the  revolving  credit
facility was reduced to $25,000,000.00  and South Trust Bank and Wachovia ceased
participation in the credit facility.

     The Credit Agreement was further amended by that certain Second  Amendment,
whereby,  among other things,  the Termination  Date of the Credit Agreement was
extended  to  March  26,  2007  and the  Guarantors  agreed  to  unconditionally
guarantee the obligation of Borrower to Union Planters and Bancorp.

     The Credit  Agreement was further modified by that certain Third Amendment,
whereby, among other things, Section 5.06 "Fixed Charges Coverage" was amended.

     Borrower  will not be in  compliance  with the loan  covenants set forth in
Sections  5.03 and 5.06 of the Credit  Agreement for the first quarter of fiscal
year 2005, and Borrower has requested that  compliance with those loan covenants
be waived.

     Union Planters and Bancorp have agreed to waive  compliance with the Credit
Agreement upon the terms and conditions hereafter set forth.

     The parties have agreed to execute this Fourth Amendment to set forth their
understandings.

     NOW, THEREFORE, the parties do mutually covenant and agree as follow

<PAGE>

1.   Waiver.  Compliance by Borrower with the loan covenants contain in Sections
5.03 and 5.06 is hereby  waived by Lender with respect to the  Borrower's  first
fiscal  quarter  ending April 30, 2005.  This shall  constitute a one-time  only
waiver of the  aforementioned  loan  covenants  and shall not be deemed to be an
ongoing amendment to the Credit Agreement.

2.   Terms of  Credit  Agreement.  All  terms  under the  Credit  Agreement,  as
previously  amended,  and related loan documents  shall remain in full force and
effect  and are  hereby  reaffirmed  by  Borrower  and  incorporated  herein  by
reference as if fully set forth.  Failure on the part of Borrower to comply with
the terms of the Credit Agreement, including failure to comply with Section 5.03
and 506, except as set forth above,  shall constitute an Event of Default as set
forth in Section 6.01 of the Credit  Agreement.  Borrower  specifically  affirms
that all  representations  and  warranties  made  pursuant  to Article IV of the
Credit Agreement as well as all covenants,  other than as set forth herein, made
pursuant to Article V of the Credit Agreement,  not previously amended, are true
and accurate as if made as of the date hereof.

3.   Capitalized  Terms.  Except as otherwise set forth herein,  all capitalized
terms shall have the meanings as set forth in the Credit Agreement, as amended.

4.   Binding  Agreement.  This Fourth Amendment to the Credit Agreement shall be
binding upon and inure to the benefit of the parties  hereto,  their  respective
heirs, next of kin, successors, permitted assigns, transferees and grantees.

     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
the Credit Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.







                                       2
<PAGE>


                                      HANCOCK FABRICS, INC.

                                      By:      /s/ Bruce D. Smith
                                         --------------------------------

                                      Title:  Executive Vice President and Chief
                                              Financial Officer


                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                     ------------------------
                                      Telephone number
                                                      -----------------------






                                       3
<PAGE>


                                      HANCOCK FABRICS OF MI, INC.

                                      By:    /s/ Bruce D. Smith
                                         ------------------------------------

                                      Title: Vice-President
                                             --------------------------------


                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                      ------------------------
                                      Telephone number
                                                      ------------------------





                                       4
<PAGE>


                                      HF MERCHANDISING, INC.

                                      By:    /s/ Bruce D. Smith
                                          -----------------------------------

                                      Title: Vice-President
                                            ---------------------------------


                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                      -----------------------
                                      Telephone number
                                                      -----------------------






                                       5

<PAGE>


                                      HF RESOURCES, INC.

                                      By:      /s/ Bruce D. Smith
                                         ------------------------------------

                                      Title:     Vice-President
                                            ---------------------------------

                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                      -----------------------
                                      Telephone number
                                                      -----------------------






                                       6
<PAGE>


                                      HF ENTERPRISES, INC.

                                      By:    /s/ Bruce D. Smith
                                         ------------------------------------

                                      Title:   Vice-President
                                             --------------------------------

                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                     ------------------------
                                      Telephone number
                                                      -----------------------




                                       7

<PAGE>


                                      HANCOCK FABRICS, L.L.C.

                                      By:    /s/ Bruce D. Smith
                                         -----------------------------------

                                      Title:    Vice-President
                                            --------------------------------

                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                     -----------------------
                                      Telephone number
                                                      ----------------------






                                       8
<PAGE>


                                      HancockFabrics.com, INC.

                                      By:    /s/ B. Linwood Landreth
                                         ----------------------------------

                                      Title:     President
                                             ------------------------------

                                      1 Fashion Way
                                      Baldwyn, Mississippi  38824
                                      Attention: Bruce D. Smith
                                      Telecopy number
                                                     ----------------------
                                      Telephone number
                                                      ---------------------





                                       9
<PAGE>


Commitment                                 UNION PLANTERS BANK,
$20,000,000.00                             NATIONAL ASSOCIATION

                                           By:    /s/ Coney Burgess
                                               --------------------------

                                           Title:   Vice-President
                                                 ------------------------

                                           Lending Office
                                           --------------
                                           6200 Poplar Avenue
                                           HQ4
                                           Memphis, Tennessee  38119
                                           Attention: Coney Burgess
                                           Telecopy number: (901) 580-5507
                                           Telephone number: (901) 580-5481









                                       10
<PAGE>


Commitment                                 BANCORPSOUTH BANK
$5,000,000.00
                                           By:    /s/ Coy Livingston
                                              -------------------------------

                                           Title:   Executive Vice President
                                                 ----------------------------

                                           Lending Office
                                           --------------
                                           One Mississippi Plaza
                                           Tupelo, Mississippi 38802
                                           Attention:
                                                     ------------------------
                                           Telecopy number:
                                                           ------------------
                                           Telephone number:
                                                            -----------------


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