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Getting a VA Loan When You Have Bad Credit

Updated September 19, 2019
3 min read

Having bad or less than perfect credit doesn’t automatically disqualify you from utilizing your hard earned VA benefits to become a homeowner.

Here we discuss what lenders typically require and how that affects your loan chances. We’ll also take a look at topics like:

  • Is it Possible to get a VA Loan with Bad Credit?
  • What are the VA’s Credit Score Requirements?
  • What are Typical Credit Ranges for a VA Mortgage?
  • What Happens if You’ve had a Previous Bankruptcy or Foreclosure?

Is it Possible to get a VA Loan with Bad Credit?

While bad credit can make the process of securing a VA home loan more difficult, it doesn’t mean it’s impossible. Beyond credit score, lenders typically review things like payment history, assets, debts, income and employment history – meaning credit score isn’t the only factor.

What are the VA’s Credit Score Requirements?

The Department of Veterans Affairs (VA) doesn’t set a minimum credit score requirement on the VA loan. However, the VA isn’t actually lending the money; only backing the mortgage if the homebuyer later defaults.

Because of this, many VA lenders want to see at least a 620 FICO score, but the cutoff can vary by the lender, the loan type and other factors.

You may find a lender willing to process your VA loan even if your credit score is less than 620, but you might encounter less favorable interest rates.

Loan Type Minimum Credit Score Minimum Down Payment
VA Loan No minimum though most lenders require a 620 $0
FHA Loan (with 10% down) 500 10%
FHA Loan (with 3.5% down) 580 3.5%
USDA 640 for automated underwriting $0
Conventional Varies, though mid-700s is typically preferred Typically 5%

What are Typical Credit Ranges for a VA Mortgage?

It’s important to put that common 620 benchmark in perspective. The FICO credit score is used by most mortgage lenders and runs from 300 and 850.

These scores fall into different ranges (Excellent, Good, Fair, and Subprime) with some variation in credit score categorization based on lender preferences.

  • Excellent credit according to some financial institutions can be anything over 720, while others consider a credit score over 750 to be excellent.
  • Good credit is generally in the low 700s range
  • Fair credit is usually considered to be in the mid to upper 600s.
  • Subprime credit is often considered to be below 620.

That means veterans and military members with just “Fair” credit may still be able to get a VA loan.

Important Tip: It’s important to know that lenders often see different credit scores than what consumers see. Mortgage lenders get industry-specific scores, while consumers who use credit-monitoring tools usually see a more basic educational score.

It’s a good idea to closely review your credit reports before even starting the homebuying journey. You can do so for free at AnnualCreditReport.com. You won’t be able to see your mortgage credit scores, but you can look for mistakes or other errors on your reports that could be hurting your scores.

What Happens if You’ve had a Previous Bankruptcy or Foreclosure?

Bankruptcy and foreclosure are negative factors on a VA loan file, but even if you have undergone one of these processes, you may still qualify for a VA loan - even with the result being bad or poor credit.

There are two typical situations:

  1. In cases where Chapter 13 bankruptcy has been filed, a veteran or service member is required by the VA to have made on-time payments towards that bankruptcy for a minimum of 12 months before they can be considered for a VA home loan.
  2. When it comes to Chapter 7 bankruptcies and foreclosures, veterans and service members will typically need to wait two years following the bankruptcy’s discharge or the foreclosure. The wait can be longer if the default occurred on an FHA loan.

Remember, too, that your credit score can take a hit after negative events like bankruptcy or foreclosure. Sometimes it can take years to recover fully.

Even if you’re beyond those bankruptcy and foreclosure waiting periods, you’ll still need to meet a lender’s credit score benchmark to move forward with a VA loan.

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