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What VA Loan Credit Score Do I Need?

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Lending guidelines for loans backed by the U.S. Department of Veterans Affairs (VA) don’t set a VA loan credit score requirement. However, most lenders require a 620 minimum credit score for a VA loan and tend to offer lower interest rates to borrowers with higher scores.

What VA loan credit score do you need?

While the VA doesn’t set a minimum credit score for a VA loan, many lenders won’t accept a score below 620. How you’ve paid your rent or mortgage payments in the past carries the most weight with a VA home loan preapproval.

VA-approved lenders focus on your overall payment history with extra flexibility for credit bumps in your past. However, like any type of mortgage loan, the higher your credit score, the lower your interest rate offers will be.

What are the VA loan requirements for a credit score?

In addition to meeting your lender’s VA loan credit score requirement, your ability to handle other credit and debt obligations in the past 24 months will be scrutinized. This includes:

Rental and mortgage history. If you’ve paid your rent or mortgage on time over the last two years, VA lenders assume you’re likely to pay a new mortgage on time.

Last 90 days of credit activity. Lenders analyze your payment history, unpaid balances and monthly payments to see how well you manage debt, such as credit cards, student loans and car loans.

Employment and residency history. Recently discharged veterans should provide information about any deployments and military job experience if they have less than a two-year job or address history.

Federal debts. Government-approved lenders run your information through CAIVRS (Credit Alert Verification Reporting System) to verify that you have no delinquent federal debts, such as student loans or previous VA loans.

History of foreclosure or bankruptcy. VA guidelines allow you to take out a VA loan within two years of a foreclosure or Chapter 7 bankruptcy. That’s less time than the three to seven years you’d have to wait to get a new conventional or FHA loan.

How to boost your VA loan credit score

You may be able to get a VA home loan with bad credit, but you’ll pay a higher interest rate and may end up with a higher monthly mortgage payment. A credit score of 740 or higher will earn you the most competitive interest rate offers.

Here are five simple steps to boost your VA loan credit score and snag a lower VA interest rate:

Shop for lenders regardless of your VA loan credit score

It always pays to shop with at least three to five lenders for a mortgage. Whether you have a stellar or bad credit score, shopping with multiple lenders allows you to compare offers and loan terms side by side.

Mortgage rates change daily, and because VA lenders often set their own credit score standards, it’s best to compare loan estimates from several companies to ensure you’re getting a competitive rate with the lowest VA closing costs.

 

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