VA Loan Requirements: Credit Score
The Department of Veterans Affairs (VA) does not have a minimum credit score requirement for VA loans. However, lenders may have their own internal credit score requirements, known as “overlays,” which can vary.
Typical Credit Score Requirements:
- Most VA lenders require a minimum credit score of 620 to 640.
- Some lenders may accept credit scores as low as 580, but this may come with stricter terms or higher interest rates.
- Borrowers with credit scores above 740 may qualify for better interest rates and terms.
How much of a VA can I afford?
Credit Score Factors:
- Payment history: Late payments, collections, and bankruptcies can negatively impact your credit score.
- Credit utilization: High credit card balances and low available credit can lower your score.
- Credit age: A longer credit history can positively impact your score.
- Credit mix: A diverse mix of credit types, such as credit cards, loans, and a mortgage, can help your score.
- New credit: Applying for too many credit accounts in a short period can lower your score.
Tips for Improving Your Credit Score:
- Check your credit report: Ensure it’s accurate and dispute any errors.
- Make on-time payments: Pay bills and debts on time to improve your payment history.
- Reduce debt: Lower your credit utilization ratio by paying down high-balance credit cards.
- Avoid new credit inquiries: Limit new credit applications to avoid negatively impacting your score.
VA Loan Benefits:
- No down payment: VA loans often require no down payment or a lower down payment compared to conventional loans.
- Lower interest rates: VA loans may offer more competitive interest rates than conventional loans.
- No private mortgage insurance (PMI): VA loans do not require PMI, which can save you hundreds or thousands of dollars per year.
Remember to shop around and compare lenders to find the best VA loan option for your situation.