Credit Score for a VA Loan

A VA loan is a mortgage option provided by private lenders and backed by the Department of Veterans Affairs. The program is available to veterans, active-duty military personnel, reservists, surviving spouses, and members of the National Guard. There are many benefits to using a VA loan, including no required down payment or mortgage insurance.
However, with these advantages come specific requirements that must be met to qualify. One such requirement is a minimum credit score. Learn more about a VA home loan's required minimum credit score.

VA Home Loan Credit Score Requirement

While there are other credit scores, most lenders use FICO® scores when approving loans. With this in mind, let's consider what kind of FICO Score you'll need for a VA home loan.

Lenders are free to set their credit score minimums. The minimum credit score borrowers anticipate needing is 580, while VA lenders may want a higher score. Most lenders desire a credit score of 640 for a VA loan. Any number of events in a person's life can drive down a credit score, and most lenders look at the entire picture.

Although there is no fixed minimum credit score for VA loans, it's essential to know what your mortgage lender is looking for in terms of credit score and other necessary VA loan requirements. However, it's vital to remember that VA loans are intended to aid borrowers who might not have the best credit histories; as a result, lenders will cooperate to help people looking to receive this type of loan.

What's the Average Credit Score for VA Loan Borrowers?

If you're a veteran looking to buy a home, you might consider getting a VA loan. This type of loan is specifically designed for veterans and can provide benefits like low down payment requirements and more lenient credit score requirements. While the average FICO® Score for a VA loan is lower than for other types of loans, the median score for approved loans is higher than the average, at 752 as of March 2019.

However, even if your credit score is lower, there are still ways to get approved for a VA loan. You can work on improving your credit by paying bills on time and avoiding new credit, or you can look into minimum VA loan credit score requirements, which can be as low as 500 in some cases. Ultimately, the loan amount you can qualify for will depend on your credit score, income, and other factors, but a VA loan may be a good option if you're a veteran looking to buy a home.

What's the Average Credit Score for VA Loan Borrowers?

According to Ellie Mae's March 2019 origination insight report, the average FICO® Score for all closed loans was 718 in March 2019. The same report found that the average FICO® Score for VA loans that closed in March was 705. That means that, on average, most borrowers who qualify for a VA home loan have a lower credit score than those who qualify for other loans.

According to Ellie Mae's march origination insight report, the median FICO® Score for a completed VA loan transaction is 752 as of March 2019. Half of all completed transactions had an applicant with a credit score above or below this number. In other words, most veterans approved for a VA loan have higher-than-average credit scores. However, there are many ways to get approved, even if your Score isn't as high.

What Is The Minimum Credit Score For A VA Loan?

You may be eligible for a VA loan if you're a veteran or active military member. But what is the minimum credit score for a VA loan?

VA loans are backed by the Department of Veterans Affairs and can be a great way to finance a home. However, like all loans, specific requirements must be met to qualify. One of these requirements is a minimum credit score.

So what is the minimum credit score for a VA loan? The answer may surprise you, and no minimum credit score is required to qualify for a VA loan.

That's right, even if your credit score is less than perfect, you may still be able to get a VA loan.

Of course, just because there is no minimum credit score doesn't mean you will automatically qualify for a VA loan. Your credit score will still be taken into consideration when determining your eligibility. But even if your credit score isn't perfect, you may still be able to get a VA loan by compensating factors such as a high income or employment history.
Keep your credit score from holding you back if you want a VA loan. Talk to a lender about your options and see if you can get pre-qualified.

Why Are VA Loan Requirements For Credit Scores Less Strict?

If you're a veteran or active service member, you may wonder why the credit score requirements for a VA home loan are less strict than other types of loans. The answer is simple: because the Department of Veterans Affairs guarantees a portion of every VA loan, lenders are more willing to take on the risk of approving borrowers with lower credit scores. This benefit can save you a lot of money in the long run, as you'll likely qualify for a lower interest rate than a conventional loan.

The minimum credit score for a VA loan is typically 620, but some lenders may require a higher score to approve your loan. If your credit score is below 620, you may still qualify for a VA loan if you have a strong history of making on-time payments on other debts, such as auto loans or credit cards.

How To Improve Your Credit Score

Before buying a home, it's essential to know your credit score. You can get a free credit report from AnnualCreditReport.com to see where you stand. Check for errors and dispute them if necessary.

A higher credit score can benefit you when applying for a VA home loan. The minimum credit score requirement is often lower than traditional loans, but having a higher credit score can increase your loan limit and the amount you can borrow.

If you have poor credit, increase your credit score by making timely payments, paying down debt, and avoiding new debt. This can help you qualify for a VA home loan and get a better interest rate.

Understanding your credit score and eligibility requirements is essential when buying a home with a VA loan. If you have bad credit, you can still improve your score over time by paying your bills on time, paying down debt, and avoiding new lines of credit. Meeting the minimum credit requirements for a VA loan may take time, but raising your score can make a big difference.

Remember to regularly check your credit report from the agency for errors or discrepancies. Only obtain the lines of credit you need; remember that carrying a balance of more than 30% of the credit limit can negatively affect your score. Be patient and consistent in your efforts, and keep working towards buying a home with a VA loan.

Conclusion

The VA home loan program is a good choice if you want to buy a house with no down payment and don't have a high credit score, and it has lower credit score requirements than conventional loans. Most conventional loans set a minimum credit score, but VA loans do not.

So, if your credit score is below 620, a VA loan may be your best option. Moreover, VA loans are a great alternative, as lenders can set their credit score requirements if they are lower than the minimum for a conventional loan. It's essential to remember that your credit score can impact the life of the loan and influence the down payment. Therefore, it's wise to manage your finances properly, such as paying your credit card balance on time.

SOURCE:
Credit Score for a VA Loan
How does my county loan limit affect me?