You’ll want to understand Veterans Affairs (VA) loan credit score requirements if you’re considering getting a VA home loan.
While VA loans were created to make homeownership more attainable, you’ll still have to apply for a VA loan with a VA lender like USAA Bank. The terms such as your interest rate and what loan amount you’re approved for are based on multiple factors including your credit worthiness as determined by your credit scores and credit history.
We’ll break down what you need to know about VA loan credit requirements so you can be prepared when looking into getting a VA home loan.
Key Takeaways
- When you’re looking to get a mortgage like a VA loan, a lender will usually check your credit score and credit history.
- Your credit scores and credit history can impact the interest rate you’re approved for, how much you can finance with your VA loan, and if you need to make a down payment.
- The higher your credit scores, the better chance you have of getting approved for a VA loan with a lower interest rate and no or a low-down payment. You’ll still need to apply with a lender to confirm exactly what you’ll qualify for and what your VA loan terms will be.
- Credit scores aren’t the only factor in determining your VA loan details. Other factors may include your income, items on your credit report like delinquencies or bankruptcies and your debt-to-income (DTI) ratio.
What is the minimum credit score for a VA loan?
The VA doesn’t indicate a minimum credit score necessary to get a VA home loan; however, you will still need to get approved by a lender to get your VA loan. Your chosen lender, like USAA Bank, will assess your credit score and history.
The minimum credit score requirements for VA loans vary by lender. Since the VA guarantees a portion of a VA home loan, reducing the lender's risk, some lenders may be willing to consider your application even with lower credit scores. The first step is to speak with a VA lender, such as USAA Bank, to learn more about VA loans.
Understanding credit scoring models
One important thing to remember with credit scores is that there are many credit scoring models that are used for specific financial transactions such as car loans, boat loans, or credit cards. There are three major credit bureaus – Equifax®, Experian®, and TransUnion® – and all provide credit history and credit scores. The most commonly used credit scoring model used for mortgage applications is the FICO® model which utilizes information from all three credit bureaus.
While lenders may use different credit scores when you apply for a loan, the basic scale or where you fall on it is usually not very different. So, if you have an excellent credit score, it’s likely to be excellent on another credit scoring model. This is because many of the credit score factors are similar in most models as they help assess risk and likelihood for you to pay back any credit you’re given.
Who sets VA loan credit score requirements?
Since the VA doesn’t call out any VA loan credit score requirements, your lender determines the minimum qualifying credit scores they'll consider for VA home loans. Lenders may have different criteria so one lender may provide a VA loan to you with a lower credit score than another lender.
Is credit score all that matters for VA loan approval?
Credit scores aren’t the only thing that determine your approval status or VA loan terms. Some other factors considered may include:
- Items on your credit report such as your payment history and if you have serious delinquencies or a bankruptcy
- Your income
- Your debt-to-income (DTI) ratio
- If you’re able and planning to put money down on your VA home loan
You can speak with your USAA Bank lending team to learn more about what’s considered throughout the application process. Because the VA is guaranteeing a portion of your VA loan, VA loan requirements are often less stringent than conventional mortgages.
Factors that affect your credit
There are several common factors that play a role in determining your credit scores. While these exact factors and the weight or impact of them in your credit scores vary by credit scoring model, you can use the FICO® Score as a gauge to understand the factors and impact. While every credit scoring system may not weigh factors the same amount, this will give you a good idea of what you’ll want to pay attention to with your own credit scores.
Understanding different credit scores
As mentioned previously, there are many different credit scoring models. However, according to FICO®’s website, more than 90% of top lenders use FICO® Scores. Below is a representation of FICO®s credit scoring model that can help you understand how your FICO® Score is determined, better preparing you as you start the VA loan process.
Payment history
Payment history, or your track record of making on-time payments, is a key factor in determining your credit score. Making your payments on time shows lenders you're a reliable borrower, making them feel more confident that you'll keep up with your VA loan payments. The impact of a late payment will reduce over time. If you become extremely delinquent on payments, the impact to your credit score increases, usually driving your score down substantially.
Credit usage or amounts you owe
The amounts owed is the second most important factor in your FICO® Score. The lower you can keep your credit card balances, the better. Paying off credit cards every month is ideal, but if you must keep a balance, you should keep credit card balances below 30% of your total credit limit. Not only will high credit card balances negatively impact your credit score, but you’ll also end up paying more money over time in interest.
Tip before you apply for a VA loan: Keep your credit card balances low.
Length of credit history
Your length of credit history is how long you’ve been using credit. Managing credit successfully for longer shows lenders that you know how to effectively manage your credit and are less likely to be a risk for them by not paying back a VA loan.
Tip before you apply for a VA loan: it is generally not recommended to close credit cards once you pay them off. Keeping them open helps you add time to your credit history. The only caveat here is that if you’re paying an annual fee, you may want to weigh the cost of the fee with any benefits you’re getting to see if it’s worth it.
New credit requested or credit inquiries
New credit requested means hard inquiries on your credit report. A hard inquiry is when a lender or financial institution requests your credit history, such as when you’re applying for a loan or credit card. If you’re requesting a lot of new accounts, that may decrease your credit score slightly because lenders could see that you might be taking on a lot of other new debt. Keep in mind that if you are shopping for a mortgage and have your credit pulled between multiple lenders within a 45 day period it will be recorded as a single inquiry, see Consumer finance.gov. Over time, the impact of a credit inquiry reduces.
Soft inquiries, however, have no impact on your credit score. Some examples of soft inquiries include you checking your own credit report or receiving a prequalified credit offer.
Tip before you apply for a VA loan: avoid taking on any other big loans or requesting credit in other areas like credit cards or auto loans, as these could negatively impact your credit score.
Credit mix
FICO® Scores will also consider your mix of credit cards, installment loans, retail credit cards, and mortgage loans. Often, they see successfully managing different types of credit as a plus.
Do you get a credit score with your credit report?
No, your credit scores and credit reports are two different things. However, some of the information on your credit report is what goes into determining your credit score like payment history, how much credit you’re using, and how long you’ve been using credit. As part of the homebuying process, your VA lender like USAA Bank may pull your credit report and provide you your credit score. Additionally, on your own, you can request a credit report from Equifax®, Experian®, and TransUnion®, or you can get a free credit report from all three bureaus at once every week .
Will checking my own credit report hurt my credit score?
Not at all. You can check your own credit report as many times as you want. Hard inquiries only happen when a company makes a request to see your credit report (and you’ll have to authorize them to do so). Checking your own credit report is a type of soft inquiry, which has no impact on your credit scores.
Is it hard to get approved for a VA loan with a low credit score?
The VA does not have a minimum credit score requirement, but your VA lender will, and you will still need to meet your lender's loan requirements. VA loans were created to open up homeownership to veterans and service members. So, speak to a VA lender to see if it is easier to get approved for a VA loan than some other conventional loans.
Tools and resources provided by USAA Federal Savings Bank should be considered general advice and for informational purposes only. All information is subject to change without notice and may not apply to all members. Products, services or features mentioned may not be offered by USAA Federal Savings Bank. The information contained is not intended to represent any endorsement, expressed or implied, by USAA Federal Savings Bank or any affiliates.
Learn more about applying for a VA home loan
Learn more about a VA loan and what you might be able to qualify for with your credit. You can speak with a USAA Bank home loan officer anytime to ask questions. Just fill out our contact form, and we’ll get in touch to share more about the savings, costs, and benefits of a VA home loan.
8202173.0826
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