Sometimes yes/no questions aren’t so simple. Consider this: If you asked most Americans if insects belong on restaurant menus, you’d get a resounding no. However, other cultures would be just as quick to answer that question with a yes. They’d find nothing strange about nibbling on grasshoppers, crickets, ants, and even beetles. What could a debate about eating insects have in common with VA loans? When you ask whether there’s a minimum credit score for a VA loan, you’ll get a similarly mixed answer.
The Minimum Credit Score for a VA Loan
As ArmyTimes reports, the maximum loan guaranty for a VA loan was just $2,000 when the program first launched as part of the Servicemen’s Readjustment Act of 1944. While the details of the Department of Veterans Affairs’ home loan program have changed repeatedly in the decades since its inception, the purpose has remained constant: The program was designed to help service members and veterans become homeowners.
Credit Scores and VA Loans
Is there a minimum credit score for a VA loan? That depends on who you ask. As Experian explains, the VA requires borrowers to have a stable income and adequate credit to win approval for the loan that they are requesting. Credit standards are more relaxed, and the VA sets no formal minimum credit score for a VA loan.
However, the VA doesn’t actually provide the loans. Instead, it offers a guaranty that reduces the risk for the private lenders who do make VA loans. These private lenders follow guidelines set by the VA, but they’re allowed to add their own rules too, and many have a minimum credit score in mind. Therefore, in the eyes of the VA, there is no minimum credit score requirement. However, the reality is that you may need to have a certain credit score in order to convince a lender to approve your VA loan application. This minimum credit score varies from lender to lender, so if one lender rejects your application, you may have better luck elsewhere.
How to Improve Your Credit Score
If you’re worried about a low credit score ruining your chances of securing a loan, it may be wise to put a little time and effort into improving your score. After all, would-be borrowers with higher credit scores are not only more likely to be approved, but also more likely to be offered favorable terms and better interest rates. If you’d like to polish your credit score, then consider these tips offered by myFico:
- Check your credit report. Mistakes happen, and they can bring down your credit score. Request your credit report, and dispute any errors.
- Make payments promptly. Your payment history is responsible for 35 percent of your FICO credit score, so pay your debts on time and in full. If you have any missed payments on your record, get current. Then, be careful to stay on track.
- Decrease debt. Credit utilization is a measure of how much of your available credit you’re using, and it makes up 30 percent of your FICO credit score. That means that you want to keep the ratio of your debt to your available credit low. Pay off your debts, and keep the balances on any revolving accounts low. Avoid closing out old accounts because this would decrease the amount of credit available, which could negatively impact your credit utilization.
- Mind your credit mix. Lenders prefer lending to people who have demonstrated that they understand how to use various types of credit effectively. Mixing credit card usage with other forms of credit like car loans and personal loans can raise your credit score if you make your payments properly.
- Use credit responsibly. You have to use credit to build it, so it’s important to utilize some form of credit. However, it’s essential that you use it responsibly if you want to raise your credit score. Don’t open several new accounts that you don’t need at once. This can backfire and make you seem like a risky bet.
When you have questions about home loans or the loan approval process, turn to the experts at PrimeLending: Manhattan, Kansas. Our offerings include a wide variety of loan products, and we’re happy to work with you so that you can find the right one for your needs. Contact us today to learn more about our services.