The U.S. Department of Veterans Affairs does not set a minimum credit requirement to be eligible for a VA loan. It is up to the individual lenders to determine their own requirements. However, credit scores are still an important part of applying for a VA loan. Credit scores assist lenders in determining eligibility and impact the rate you may qualify for. Here is what you should know about how your credit score can affect your application for a VA loan.
What is the minimum credit score for a VA Loan?
Generally, the minimum credit score required for a VA loan ranges from 580 to 620 but many lenders like Freedom Mortgage may offer loans to veterans with lower scores provided other underwriting criteria are met.
When you apply for a VA loan, a lender will pull your credit information from the three credit bureaus: Equifax, Experian and TransUnion. They will analyze your credit scores, look at your payment history, and check any outstanding debt you may have. (Learn more about what makes up your credit score.)
What can affect your credit score?
Before you apply for a VA loan, you should review your credit report. You are eligible for a free credit report through www.annualcreditreport.com. Read through the report and make sure there are no errors. If you find some discrepancies, you can contact the credit bureau to investigate and correct the error. This may increase your credit score. Here is a list of other issues that may have an impact on your score and your eligibility to be approved for a VA loan.
- Late payments. If you constantly miss your monthly bill payments, it can have a large effect on your credit score. Lenders generally look to see if you have made on-time payments for a year. They want to ensure that you won’t default on your mortgage in the future.
- No credit history. It’s important to have a history of credit in your profile in the form of credit cards or other loans to show a history of repayment.
- Bankruptcy. If you’ve filed for bankruptcy, your credit score can suffer and it could impact your ability to secure a VA home loan. However, you may be able to still qualify even with a prior history of bankruptcy. Generally, for a VA loan you need two years to improve your credit score from a Chapter 7 bankruptcy and one year for a Chapter 13 bankruptcy. This means having a stable income, paying bills on time and establishing good credit.
- Previous foreclosure. If your credit history includes a previous foreclosure, you may still qualify for a new VA loan after two years.
Before you apply for a VA loan, make sure your credit score is where it should be to qualify and get the best loan rate and terms for your VA loan. Freedom Mortgage is committed to helping veterans, with all credit scores, realize the American dream of home ownership.
Contact us today so we can help assist you with your VA home loan needs.