VA loans can be tremendously helpful for those whoâve served their country in the United States armed forces, as well as those who are currently serving and those whose spouse has died from or after suffering a service-related disability or is missing in action or a prisoner of war. Not only do VA loans tend to have low interest rates compared to most other loan options, but they also provide financial benefits like refinancing equity and buying a house with no down payment. So, whatâs the minimum credit score needed to qualify for a VA loan?
Letâs walk through some important-to-know information about the minimum credit score for VA loans, and weâll highlight some key considerations to keep in mind.
Getting approved for a mortgage loan can be challenging, especially if you have less-than-perfect credit. However, VA loans provide more flexible credit requirements than conventional loans, making homeownership possible even with a low credit score. In this article, we’ll explore the key things to know about getting a VA loan with a low credit score.
VA Loans Don’t Have a Set Minimum Credit Score
The U.S. Department of Veterans Affairs (VA) itself doesn’t impose a minimum credit score requirement for eligibility. Instead, individual lenders set their own minimum credit standards when underwriting VA loans. This gives veterans and military families access to low down payment loans even if they don’t have excellent credit.
Most Lenders Require a 620 Credit Score
While specific requirements vary by lender, most have a minimum credit score requirement around 620. For example, major VA lenders like Veterans United, Navy Federal Credit Union and USAA requite a 620 FICO score at a minimum
So while the VA doesn’t impose a minimum, a FICO score of at least 620 is a good benchmark to aim for when applying for a VA loan.
Some Lenders Will Go As Low As 500
Certain lenders offer VA loans to borrowers with credit scores as low as 500. These lenders take on more risk, but do so in order to serve more military families.
For example, Movement Mortgage has a minimum credit score of 580 for VA purchase loans, and Caliber Home Loans goes as low as 500. However, borrowers with scores below 620 will likely get less favorable interest rates.
Factors Besides Your Credit Score Are Also Important
When evaluating a VA loan application, lenders look at more than just your credit score. Other key factors include:
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Debt-to-Income (DTI) Ratio: Your total monthly debt payments, including the new mortgage, as a percentage of your gross monthly income. VA guidelines limit DTI to 41% but most lenders stay under 50%.
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Down Payment Amount: VA loans allow 0% down but a larger down payment can compensate for poorer credit.
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Overall Credit Profile: Late payments, collections, judgements and other negative items also factor in, not just your score.
So even if your credit score is on the lower end, having positive factors in these other areas can improve your chances of getting approved.
Tips for Improving Your Credit Score for a VA Loan
While lenders may approve VA loans with scores as low as 500, you’ll get better rates and terms if you can boost your credit score above 600 or ideally over 620. Here are some tips:
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Pay all bills on time going forward. Your payment history makes up a major part of your credit score.
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Pay down credit card and revolving debt balances. High utilization hurts your score.
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Limit new credit inquiries by only applying for credit when needed. Too many hard inquiries and new accounts can ding your score.
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Correct any errors on your credit report by disputing them. Mistakes could be dragging down your score.
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Become an authorized user on someone else’s account. This can build your credit history.
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Sign up for credit monitoring to stay on top of your score. Rocket HomesSM offers a free credit and score monitoring service.
With some time and diligent credit management, it’s possible to raise your credit score significantly in as little as 6-12 months.
VA Loan Credit Requirements Are More Flexible Than Conventional Loans
VA loans offer more flexibility around credit than conventional loans backed by Fannie Mae and Freddie Mac, which generally require minimum scores of at least 620. FHA loans, while available to borrowers with scores as low as 500, require mortgage insurance payments.
The credit leniency of VA loans makes them particularly valuable for eligible military borrowers. Due to frequent relocations, deployments and other disruptions, veterans may not have lengthy or robust credit histories. VA loans help combat this disadvantage.
Work With a Reputable VA Lender
If your credit score is on the lower end, be sure to work with a lender that specializes in VA loans. The right lender will guide you through credit improvement strategies, document preparation, and the loan process. Veterans United, Navy Federal, and USAA are all excellent options with decades of VA loan experience.
While every situation is different, with the right VA lender, improving your credit, and documenting your circumstances, VA loan approval is possible even with credit scores around 500-600 in many cases.
What Is Rocket Mortgageâs VA Home Loan Credit Score Minimum?
All mortgage lenders are in charge of setting a minimum credit score for VA loans. Our friends at Rocket Mortgage® require borrowers to have at least a 580 median FICO® Score.
Rocket Mortgage will also review your baseline mortgage payment â plus monthly homeowners insurance, property taxes and any monthly homeowners association dues â and divide this total by your gross monthly income. DTI will also be considered as a good indicator of how well youâll manage your overall debt.
Can I Get A VA Loan With Bad Credit?
Itâs possible to get a VA loan with bad credit, but the credit score minimum is ultimately in the hands of the mortgage lender you end up choosing. Keep in mind: Other factors â like your debt-to-income ratio (DTI) â also help determine whether you qualify for a VA loan.
VA Loan Credit Score Requirements: NO Minimum Credit Score Required!?!
FAQ
Can I get a VA home loan with 550 credit score?
Can I get a VA loan with a credit score of 580?
Is it hard to get a VA loan with bad credit?
What is the minimum credit score for VA cash-out?
Does the VA set a minimum credit score?
No. The VA does not set a minimum credit score for the VA loans it guarantees. Instead, it asks lenders to look at the full loan profile of the person applying for a VA loan. However, lenders can establish their own minimum credit scores for VA loans, which is why you might see that various lenders require different scores.
What credit score do you need for a VA home loan?
The VA doesn’t set a minimum credit score to qualify for a loan. But VA mortgage lenders can set their own minimum standards for FICO credit scores, which are typically in the low- to mid-600s. Lenders will also look at your credit report, particularly your history of making timely payments. » MORE: See VA home loan credit score requirements
Do VA loans have a low credit score?
VA loans were created to expand access to homeownership, and one of the ways they’re still fulfilling that mission today is through more flexible and forgiving credit underwriting requirements. Credit score minimums vary by lender, but VA loans often have lower score requirements than other loan types.
Are VA loans a good option for veterans with low credit?
VA loans are a great option for veterans with low credit scores. Compared to other loan types, VA loans have the lowest minimum credit score requirement and, unlike FHA loans, don’t ask for a bigger down payment if you have low credit.
What is a good FICO credit score for a VA loan?
According to a February 2023 Experian report, the national average FICO credit score is 714. Experian also notes that credit scores below 670 fall into the “fair” or “bad” groups. However, most VA lenders will typically look for a minimum FICO credit score of 620 to qualify for a VA loan.
Can you get a VA loan if you have bad credit?
If you have damaged credit, make sure to shop around — low credit mortgage lenders do exist who will give loans to veterans with bad credit scores. VA loans can be accessible to those with scores in the 500s and low 600s. However, as with any type of mortgage loan, the higher your credit score, the lower your interest rate offers will be.