VA loans are among the most in-demand mortgages out there. And for good reason too: VA home loans offer highly competitive lending terms — most notably 0% payment options. If you’re a member of the armed forces — or you’ve served in the past — you may qualify for a VA loan, but you’ll still need to meet some baseline qualifications.
Arguably the biggest barrier for VA loan eligibility is your credit score. Even if you've completed multiple tours of duty, a lackluster credit report could derail your VA mortgage application. We stress “could,” because it is possible to get a VA loan with bad credit. It’s not always easy, of course.
Let’s take a look at the most recent VA loan requirements — credit score guidelines, specifically — to get a better sense of what you need to do to qualify for this type of mortgage.
What’s considered bad credit, exactly?
Before we can really dig into VA loan credit score guidelines, we need to take a step back and define what bad credit is, anyway. As a quick refresher, credit scores are calculated by the nation’s three major credit bureaus as a way to sum up and quantify your credit history in some measurable fashion. Lenders and other financial service providers then use those scores to gauge the credit-worthiness of potential borrowers. Higher scores indicate a better track record juggling credit, repaying debt and managing your finances.
So, what’s bad credit? Well, credit scores exist on a spectrum, going from 300 to 850. Here’s how that credit score range typically breaks down:
Credit score ranges
- Exceptional: 800-850
- Very Good: 700-799
- Good: 670-739
- Fair: 580-669
- Poor: 579 or lower
Given those parameters, a credit score lower than 580 would be considered bad.
Is it possible to get a VA loan with bad credit?
Short answer: Yes, VA loan poor credit options are available. Long answer: It’s a little more complicated than that, depending on other aspects of your loan qualifications, your lender’s threshold for risk and the current lending environment.
Arguably the most important factor to consider is your lender. Each mortgage company will abide by its own set of lending guidelines, which themselves can change in response to shifts in the mortgage lending industry.
What does this mean for your prospects of getting a VA loan with bad credit? Well, every lender may have its own idea of what qualifies as bad credit. One mortgage company may reject a credit score below 620, while another may accept it as long as other aspects of the loan application do enough to minimize risk.
What is the lowest credit score you can have for a VA loan?
While other types of loans may have strict credit score minimums, that isn’t the case with VA mortgages. There is no minimum credit score for VA loans, so you could be eligible for a VA home loan, bad credit notwithstanding.
Keep in mind, though, the VA may not set credit score requirements, but your lender very well might. In fact, most mortgage companies — even those billed as VA loan lenders for bad credit — will only accept VA loan applications with at least a 620 FICO score.
At Guaranteed Rate, we’ve tried to broaden lending terms so more service members can realize the dream of homeownership. That’s why Guaranteed Rate offers low credit score VA home loans to many qualifying current and former members of the forces. It just depends on the size of your home loan (plus other lending qualifications):
Minimum credit score
Up to $647,200
$647,201 to $970,800
When will lenders accept VA loans with bad credit?
Credit scores, as important as they are, are not the only factors that lenders weigh when considering a loan application. It’s true that some automated underwriting systems (AUS) may reject home loans that fail to meet certain credit thresholds, but generally speaking, there are other criteria that go into lending decisions — at least as far as vetting your financial status:
- Your income
- The amount of liquid assets you own
- Your recurring debt
- Your employment status
Your credit score is a reflection of your credit history, and that means it may not always accurately represent your current financial circumstances. During the underwriting process, lenders may look past bad credit if you have consistent income streams, a relatively low debt-to-income ratio (DTI) and a stable job. So, don’t be too discouraged if you have a low credit score; you may still qualify for a VA loan with bad credit.
When can a VA home loan be denied?
A low credit score isn’t the only reason your VA loan application can be rejected. Don’t overlook these other pitfalls that potential borrowers may fall into:
- Eligibility issues relating to your service record (check the latest VA home loan requirements to be sure you qualify)
- Taking on new debt after your loan has been conditionally approved, increasing your DTI
- Inability to verify your financial or employment status
- Concerns with the property itself, either because its appraised value presents insufficient collateral or because it doesn’t meet the VA’s property requirements
What can you do if your VA loan is denied?
Receiving a loan denial is tough, but it’s not the end of the world. You still have options to consider even if your VA loan is rejected.
- Request a manual underwriting review
- Find another VA lender
- Build up your credit
Step 1: Request a manual underwriting review
If your VA loan application is denied outright, chances are it’s because the lender’s AUS system noticed a red flag — bad credit, high DTI ratio, insufficient income, etc. Rather than take the rejection and walk away, ask your lender for a clarification. What exactly caused them to deny your VA loan. Go one step further and ask for a manual underwriting review. If your lender agrees, a member of the underwriting may take a closer look at your finances and decide that you should qualify for a VA loan after all.
Step 2: Find another VA lender
Let’s say your lender conducted a manual review and still rejected your loan application. Your next option is to look for VA mortgage lenders that accept more flexible borrower qualifications. Certain lenders — like Guaranteed Rate — are more willing to work with veterans buying a house with bad credit. It’s our way of saying thank you for your service. If you’re turned away by one lender, there could very well be another mortgage company out there that’s more than willing to extend you a home loan.
Step 3: Build up your credit
If all else fails, your best course of action may be to spend some time improving your credit score* so it’s no longer an obstacle standing in your way. Not too much time, mind you — you don’t want to hold off on buying a home while you spend years and years trying to achieve the perfect credit score. But getting your financial house in order can go a long way to improving your lending experience. Be sure to speak with a qualified credit advisor on the best ways to go about repairing your credit.
A bad credit score will not immediately disqualify you from qualifying for a VA home loan — far from it, actually. The Department of Veterans Affairs doesn’t even set a minimum credit score requirement. Having said that, mortgage companies will have their own eligibility standards for you to meet, so getting a VA loan with bad credit really depends on your lender.
Guaranteed Rate’s VA home loan requirements are pretty flexible when it comes to credit scores. As long as the loan amount you’re seeking is less than $647,200, you could qualify for a VA loan with a credit score as low as 580. Don’t let bad credit stand in your way of finding your dream home. Talk to a qualified VA mortgage expert to find out the next steps you can take on the path to homeownership.
Guaranteed Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency.
*GUARANTEED RATE IS NOT A CREDIT REPAIR COMPANY, CREDIT REPORTING AGENCY, BROKER OR ADVISOR. You acknowledge that Guaranteed Rate is not a credit repair company or similarly regulated organization under applicable laws, and does not provide credit repair services. Where available, recommendations, tips and education materials are provided to you at no additional charge, and for educational purposes only. The services are intended to provide you with general information and assist you with identifying your options. The information is provided only to enable you to make your own choices about your personal finance, and is not intended to provide, legal, tax or financial advice. We do not provide any services to repair or improve your credit profile or score, nor do we provide any representation that the information we provide will actually repair or improve your profile. Consult the services of a competent professional when you need any type of assistance. You acknowledge that Guaranteed Rate is not a “consumer reporting agency” as that term is defined in the Fair Credit Reporting Act as amended.
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