VA Loan Credit Score Requirements

Find out What VA Loan Credit Scores You Need to Qualify

Having a good credit score can be an important part of qualifying for a VA loan. That's because lenders like Freedom Mortgage use your credit score to help determine your eligibility for a VA loan as well as set your interest rate as low as possible.

In this article, we'll cover topics and questions related to VA loan credit score requirements and show you what you need to obtain a VA loan.

What Is the Minimum Credit Score for VA Loans?

The VA doesn't set a minimum credit score requirement for VA loans. Instead, it asks lenders to look at the full loan profile of the veteran applying for a VA loan. However, mortgage lenders establish their own minimum credit scores for VA loans, which is why you might see that various lenders require different scores.

At Freedom Mortgage, we require a minimum score of 550 for a new VA loan, which may be lower than many other lenders. We want as many eligible Americans as possible to take advantage of the VA loan benefit they earned through their service.

Other VA Home Loan Requirements

Besides your credit score, there are a few other VA loan requirements to consider when you apply. Elements such as eligibility, debt-to-income ratio (DTI), and the VA funding fee help determine whether you qualify and how much your loan will cost.

• Eligibility: VA loans are available to veterans, active-duty service members, certain National Guard and Reserve members, and qualifying surviving spouses. Eligibility generally requires meeting specific service length or duty requirements.
• Debt-to-income ratio (DTI): DTI measures a borrower's monthly debt payments compared to their gross monthly income. For VA loans, borrowers typically need a DTI of 41% or lower, though higher ratios may be allowed under certain circumstances.
• Funding fee: The VA funding fee is a one-time required payment added to the loan amount to help offset the program's cost to taxpayers and to protect the VA program when loans defaults. It varies based on factors like down payment amount, loan type, and whether it's the borrower's first VA loan. Veterans with a disability recognized by the VA and some surviving spouses may be eligible for a VA funding fee waiver. Freedom Mortgage will help you find out if you are eligible to waive the VA funding fee and save thousands of dollars.

What Are Freedom Mortgage's VA Loan Credit Requirements?

At Freedom Mortgage, the minimum credit score we require depends on the purpose of the VA loan. The current minimum credit score for VA loans is 550:

• Home purchase: When you want to buy a home with a VA loan, we can often accept a minimum credit score as low as 550.
• Refinancing: When you want to refinance a home with a VA loan, we can often offer an easy credit score qualification. Learn more about VA refinancing.
• Cash out refinancing: When you want to get cash from your home equity with a VA loan, we can often accept a minimum credit score as low as 550. Learn more about VA cash out refinancing.

Is It Possible to Get a VA Loan with Bad Credit?

It is possible to get a VA loan with a bad credit score, but it may come with added challenges, such as higher interest rates and closing costs. Our article about how to get a VA loan with bad credit highlights the specifics of buying or refinancing a VA loan if you have less than perfect credit.

As mentioned, the minimum credit score to buy a house with a VA loan with Freedom Mortgage is 550, which is typically considered a poor credit score. You can check your credit score through your bank or credit card issuer or by signing up for free services from a major credit bureau (Experian, Equifax, and TransUnion).

How to Improve Your Credit Score

If your credit score is lower than the minimum your lender requires for a VA loan, this doesn't mean you can't qualify for a VA loan in the future.

The three main credit reporting agencies—Equifax, Experian, and TransUnion—use several factors to calculate your credit score. Here are some ways you can work on improving your credit score:

• Pay bills on time. Lenders like to see that you have a record of paying your bills in full and on time. A good payment history can increase your credit score. A history of paying bills late may decrease your score.
• Focus on credit history. The length of time you've had a credit history affects your score. When you've consistently made your payments over a long period of time, this can raise your score.
• Vary your credit mix. Having different types of loans—such as credit cards, mortgages, and car payments—can influence your credit score.
• Avoid bankruptcy. Your credit score can suffer if you've ever filed for bankruptcy. It's possible to improve your score after bankruptcy, and veterans can qualify for a VA loan after bankruptcy, as well.
• Monitor for errors and mistakes. Sometimes credit reports can contain mistakes that might lower your credit score, such as on-time payments that have been reported as late, incorrect account balances, incorrect credit limits, and more. Contact a credit reporting agency if you see errors and request that they fix them.

Even if your credit score is higher than the minimum your lender requires for a VA loan, it can be a good idea to improve your credit score. That's because a higher credit score can improve your chances of getting approved for a VA loan and might help you get a lower interest rate, too.

Final Thoughts on VA Loan Credit Score Requirements

Your credit score isn't the only information used to help lenders decide if you qualify for a VA loan. At Freedom Mortgage, we look at the complete picture of your finances because we're committed to helping eligible veterans, active-duty service members, and their families finance homes with VA loans.

If you're ready to save money when you buy or refinance with a VA loan, get started today.