Minimum Credit Score for VA Home Loan
When you obtain a VA home loan, the U.S. Department of Veterans' Affairs guarantees part of your mortgage. That guarantee enables lenders to offer loans with better terms, such as lower interest rates and no down payment. While there's no official minimum credit score for a VA Home Loan, you must still meet a prospective lender's criteria, which may include a minimum credit score.
Disclaimer: Paid advertising. We receive advertising fees from Novus Home Mortgage.
- The VA doesn’t require a specific credit score to be approved for a loan, although individual lenders have their own requirements.
- While each lender has different criteria, most require a credit score of 620 or above.
- Your credit score is one of the most important factors in your loan application, and you can take steps to improve it.
VA Loan and Credit Score Requirements
The VA doesn’t have specific credit requirements to qualify for a VA-backed loan. To be eligible for a VA home loan, you must only satisfy the service criteria and have remaining housing entitlement.
To start the VA loan process, you must either apply for a Certificate of Eligibility, or COE, online or request that your private lender do so. You must also meet your private lender’s requirements to be approved for a VA-backed loan. Many lenders require a minimum credit score, typically around 620, to approve your application. However, the exact score you need depends on the specific lender. Lenders that cater to veterans or first-time homebuyers may have lower requirements.
VA home loan approval also depends on your overall financial situation, not just your raw credit score. Depending on the lender, a low debt-to-income ratio, stable employment, or a large down payment may compensate for a lower credit score.
You may want to request a loan preapproval when you start working with a lender. Doing that can give you a budget for house hunting, or, if you’re not approved, give you a chance to improve your credit score.
What Is My Credit Score?
Your credit score is a three-digit number between 300 and 850. The higher the number, the better your credit. Calculated by the three major credit bureaus, this number is a quick indicator of your credit health. Your payment history, total credit usage, current loan balance, recent applications, and more are all factored into the calculation.
Many veterans think they need a great credit score to get a VA loan, but that’s false. The 620 score required by many lenders is only considered fair.
Under federal law, you’re entitled to a free credit report from each bureau every 12 months. You can also request a report through your bank or a credit monitoring agency. Requesting a free credit report is a great way to prepare for the VA home loan.
Why Lenders Require a Minimum Credit Score
Lenders are taking a risk on you when they approve your loan. They want to be sure that they’ll make money on that risk. Thus, they will evaluate whether you can pay the loan back on time with interest. Your credit score is one metric they use to judge your ability to repay the loan. A low credit score is often a sign that someone misses payments or takes on more credit than they can afford.
Other financial indicators also matter in your loan application. Your debt-to-income ratio, or how much of your monthly income you spend on your debt, is a major factor, as is your income history. If your credit score is still too low, you can use a co-signer for your purchase, increase your down payment, or decrease the loan size you’re looking for.
Your VA home loan has a partial guarantee from the VA, which provides benefits such as better loan terms and no need for private mortgage insurance. The VA’s backing also encourages lenders to consider a broader group of potential borrowers, though it doesn’t guarantee approval.
How To Improve a Low Credit Score
While raising your credit score may take a while and require changing your spending habits, it’s well worth the effort. A better credit score often means lower interest rates and better terms.
- Review your credit report for errors. Identity theft and mistakes can drag down your credit score through no fault of your own. If you see loans you don’t recognize or payments that look off, make a report with the credit bureaus.
- Make paying down debt a priority. Lowering your debt burden is one of the fastest ways to improve your credit score. Review your budget and redirect more of your money towards paying off debt, starting with your highest-interest loans.
- Pay on time, every time. Even one missed payment can make a serious dent in your credit score. Make a schedule or turn on autopay to prevent late payments. If you think you might miss a payment, contact the lender on that loan right away. There may be options that result in less damage to your credit.
It’s not impossible to get a loan with a low credit score. Look for lenders that cater to veterans or buyers with less-than-perfect credit.
Additional Factors Affecting VA Loan Approval
Your credit score is one of the most important factors for securing approval for a VA home loan, but it’s not the only one. Other things lenders will also look at the following information:
- Your service record: You must fulfill service requirements to receive the VA partial loan guarantee.
- Your employment history: Lenders prefer a steady employment history, especially a long tenure at one company or an upward career trajectory.
- Your income: A good income shows lenders that you’ll have cash on hand to handle financial emergencies without missing a mortgage payment.
- Your debt-to-income ratio: A good debt-to-income ratio shows that you can afford to take on additional debt.
A good lender understands that many veterans leave the service with less-than-ideal credit scores. They’ll help you explore your options and let you know how to improve your application. Look for a lender experienced in VA loans, or contact us for help finding one.
Ready To Take the Next Step?
Buying a home is a huge financial decision. Thus, preparation is key. While there is no minimum credit score for a VA home loan, having a good score increases your chances of lender approval and often means better terms. Improving your credit may require some work, but it’s very doable, especially with help from a financial counselor or veterans’ organizations. The right lender will also look at your credit score as just one part of your overall financial situation.
Jodiu has over 22 years in home lending, specializes in VA loans, and helping military families achieve homeownership. As a top loan officer at Novus, he’s closed over 9,000 loans across 40 states. Jodi is dedicated to empowering veterans with VA benefits, fostering long-term financial success, and offering personalized service.
