There is no minimum credit requirement set by the Department of Veterans Affairs for a VA loan. However, lenders who fund the loans will usually have credit requirements that the homebuyer must meet.
When determining credit eligibility for a VA loan, lenders will analyze the borrower’s credit profile. This generally includes pulling credit reports from the three major credit-reporting agencies: Equifax, Experian and TransUnion. Your lender will take the middle, or median, score as your credit score for VA loan qualification purposes.
The VA doesn’t set a minimum credit score requirement for the VA loan, but also does not make the loan. Lenders who do make the loans will typically have a credit score benchmark. That benchmark varies by lender, but a 620 FICO score is a common credit score requirement for a VA loan.
In addition to credit score, your lender will consider past credit patterns to determine willingness to repay. A borrower who has made timely payments for at least the last 12 months demonstrates their willingness to repay future credit obligations. Conversely, a borrower with late payments, judgments and delinquent accounts may not be a good candidate for loan approval.
Below is a list of items that can have an impact on a borrower’s credit profile and ability to obtain a VA loan:
In circumstances not involving bankruptcy, satisfactory credit is generally considered to be reestablished after the veteran, or veteran and spouse, has made satisfactory payments for 12 months after the date of the last derogatory credit item(s). Some lenders may allow VA buyers to have one or more 30-day late payments. Policies vary by lender.
Account balances reduced to judgment by a court must either be paid in full or subject to a repayment plan with a history of timely payments. Polices on judgments can also vary by lender.
Lacking an established credit history is an issue for lenders. Some might be OK if you have only one credit score, but it would need to meet their in-house benchmark. Borrowers who don’t have a credit score will often need to spend time building a credit profile before being able to secure a VA loan. Some lenders may consider non-traditional credit tradelines for borrowers with a minimal credit history, but these guidelines will vary by lender.
The VA guidelines state that a minimum of two years must elapse since the discharge date of the borrower and / or spouse's Chapter 7 bankruptcy, not the filing date. A full explanation of the bankruptcy will be required. The borrower must also have re-established good credit, qualify financially and have stable income.
The VA guidelines state that they will consider a borrower still paying on a Chapter 13 Bankruptcy if the payments to the court have been satisfactorily made and verified for a period of one year.
In addition, the court trustee will need to give written approval to proceed. A full explanation of the bankruptcy will be required. The borrower must also have re-established good credit, qualify financially and have good job stability.
Lenders may have a maximum allowable threshold for derogatory credit, which can include collection debt. Those caps can vary by lender and other factors.
Borrowers who have defaulted or who are delinquent on any federal debt may need to be on a repayment plan with a history of on-time payments. In addition, lenders might not move forward with a VA loan until you’re cleared from a federal debt database known as CAIVRS.
Talk with a loan specialist if you have defaulted or delinquent federal debt.
A borrower whose previous residence or other real property was foreclosed on or given a deed-in-lieu of foreclosure within the previous two years since the disposition date is generally not eligible for a VA loan. If the foreclosure was on a VA loan, the applicant may not have full entitlement available for the new loan. Default on an FHA loan can result in a three-year wait for a VA loan.