Is there a minimum credit score for a VA loan? The answer to that query depends on who you ask. One fact that everyone agrees on is that your credit score does matter when you’re seeking a home loan. That’s why it’s a good idea to make sure that your credit score is as polished as possible before you approach a lender about a VA loan.
Is There a Minimum Credit Score for a VA Loan?
It seems like a simple question that could be settled with a yes or a no. Is there a minimum credit score for a VA loan? However, getting a straight answer can be tricky because the U.S. Department of Veterans Affairs (VA) allows the lenders who actually make the loans for its VA home loan program to impose their own additional requirements on top of the ones that it sets. What does that mean for credit scores?
The VA’s Credit Score Requirements
According to the VA, the key underwriting for a VA loan includes the following:
- Credit Scores: The VA does not set a minimum credit score. Instead, the lender is expected to review the borrower’s full loan profile.
- Debt Ratio: The VA does not set a maximum debt ratio. However, if the total debt ratio exceeds 41 percent, the lender must show compensating factors.
- Loan Limits: The VA does not set a maximum loan amount. It does limit its guaranty, and borrowers who pass that threshold may face a down payment requirement.
- Income Guidelines: The VA sets residual income guidelines that lay out how much money a veteran must have remaining after living expenses and debts are considered. This protects borrowers and ensures that they can afford their loans.
Lenders’ Credit Score Requirements for VA Loans
Although the VA doesn’t demand a certain credit score, private lenders often do. The minimum credit score required to get a VA loan varies from lender to lender, but according to NerdWallet, it generally ranges from 580 to 660. Borrowers seeking a VA loan should remember two things: First, if one lender rejects their application because of a low credit score, they may fare better with a different lender. Second, a higher credit score often means that you’ll be offered better interest rates and loan terms, so it’s a good idea to make sure that you’re happy with your score before you reach out to lenders.
Tips for Improving Your Credit Score
What if your credit score isn’t where you want it to be? It may take a little time and effort, but there are things that you can do to raise your score. MyFico suggests using some of the following tips to improve your credit score:
- Request copies of your credit reports, check them over carefully for inaccuracies or missing info, and dispute any errors.
- Pay bills on time. If you’ve had missed payments in the past, get current. Then, be sure to make future payments promptly.
- Reduce the amount of debt that you’re carrying.
- Have credit cards that you use responsibly to demonstrate that you know how to manage credit. Do not close out credit cards you no longer use because this reduces your amount of available credit, which can lower your credit score.
- Keep the amount of debt you carry on your credit cards low. Aim for a utilization rate of 30 percent or less.
- Don’t rush to open a lot of credit accounts in a short time. This can seem like risky behavior. It also lowers your average account age.
- Learn what factors are weighed in the calculation of your credit score. Understanding what goes into a credit score gives you the information that you need to improve your score and helps you avoid missteps that might lower it.
The VA home loan program was created to help service members and veterans become homeowners. Is a VA loan the financial tool that will help you reach your housing goals? The friendly team of loan experts at PrimeLending: Manhattan, Kansas, is ready to help you find out. Contact us today to get started.