VA loan credit score requirements in 2024
For 2023, Department of Veterans Affairs (VA) loan limits are at an all-time high, making it possible for service members to buy a home with no down payment. Qualifying for a VA home loan or refinance means you have to meet several requirements, including obtaining a Certificate of Eligibility (COE). VA loans have several perks, including low rates and no credit score requirements, making the extra paperwork worth it.
Key findings
- The U.S. Department of Veteran Affairs does not require a minimum credit score for eligible applicants.
- VA lenders set credit score requirements, so the number can vary.
- The better your credit score is, the better your chances of qualifying for a VA loan with a lower rate.
What is the minimum credit score for a VA loan?
Qualifying military service members, veterans and their spouses are eligible for mortgages backed by the U.S. Department of Veterans Affairs, commonly known as VA loans. The benefits of VA loans include no down payment, low interest rates, no mortgage insurance and low closing costs.
While the government does not set a required minimum credit score, private lenders that offer VA loans do. The threshold varies by lender, with many requiring a credit score of 640 — others require closer to 700. Some lenders do approve loans with a credit score under 640, but this isn’t as common.
Even if a lender offers flexible credit score requirements, note that the better your credit score, the better your interest rate. It is possible to get approved for a loan with a lower credit score, but it can also mean a higher annual percentage rate (APR) on your mortgage. A higher rate means more money out of your pocket for your mortgage payment each month.
Factors that affect your credit score
There are two main credit scoring companies, FICO and VantageScore. They use data from three credit reporting agencies — Equifax, TransUnion and Experian — to determine credit scores. Two main factors they consider are your payment history and credit utilization – together these make up 60% to 65% of your score.
- Payment history: Whether you pay your debts on time heavily affects your credit score. If you have delinquent accounts, your score will go down. If you consistently pay your bills on time, you can positively impact your score. Payment history is the most influential component in determining your FICO score (35%).
- Credit utilization: Your credit utilization rate is the amount of credit you use in relation to your credit limit. If you're using 100% of your credit, this will lower your score. Maintaining a level closer to 30% utilization is ideal for a healthy credit score. As far as your utilization rate goes, it is better to have $3,000 of credit card debt with a $10,000 total credit limit over a few cards versus having $900 of debt on one card with a $1,000 credit limit. You can improve your credit utilization rate by either decreasing your credit card debt or increasing your credit card limit.
The other 35% to 40% of your credit score is impacted by factors such as how long you've had established credit, your mix of different types of credit and how many accounts you've opened within a certain amount of time.
Tips to raise your credit score to qualify for a VA loan
Your credit score may determine whether you will be approved for a VA home loan. In addition, it can impact your mortgage rate and how much your monthly payment will be. If you have concerns about being approved or want to get better loan terms, there are steps you can take to improve your credit score.
Some ways to impact your credit score positively include:
- Looking at reports from the three credit reporting agencies and disputing any errors
- Paying down balances on accounts, especially if you're using a significant amount of your available credit
- Paying your bills on time
- Keeping credit cards open, even if they're paid off
If your credit score is in the poor range, consider using a secured credit card to help you build your score back up slowly. Bouncing back from poor credit can be a slow process, but it is possible.
Credit scores update every 30 to 45 days, and it’s possible to make changes that can help you raise your credit score over time.
» MORE: What is credit counseling?
How to find the best VA mortgage lender
If you decide to apply for a VA loan, there are many lenders to choose from. VA loans are funded by private lenders, and comparing what each offers can help you decide which lender best fits your mortgage needs.
What to look for in a mortgage lender
Every mortgage lender has different benefits, but knowing what to look for can help you choose the lender that is best for your financial needs. Things to look for in a mortgage lender include:
- How long it's been in business
- Mortgage rates, credit score requirements and loan limits
- Variety of loan options
- Customer service
- Positive reviews from customers
How to find a VA-approved mortgage lender
Different types of lenders —private banks, mortgage companies and credit unions — offer VA home loans. Reach out to multiple lenders to learn about their products, process and customer service. Read reviews from customers, looking specifically for people who mention VA purchase loans, VA cash-out refinance loans and VA interest rate reduction refinance loans.
“Lenders that specialize in VA loans may be very helpful for a borrower who has a more complex credit profile as these types of lenders are typically experts at the various ways to help a veteran work on taking extra steps to get qualified,” said Jennifer Folk, chief operating officer at Minute Mortgage. “However, this does not mean that lenders who offer more than just VA loans would not be able to help a veteran get qualified.”
Our VA loan lender guide can help you find and compare lenders.
How do you get preapproved for a VA loan?
A VA loan lender should be able to give you a preapproval letter that shows you how much you can spend on a home. Getting preapproval not only tells you how much home you can afford; it also shows a seller you're serious about buying and that you already have a connection with a lender.
To get preapproval for a VA loan, you'll need to provide the following:
- A Certificate of Eligibility to show you're eligible for a VA loan
- Social Security number
- Recent pay stubs
- Proof of assets
- Employment verification
Once a lender has your information, it will calculate the amount you can borrow with a VA home loan.
Bottom line
While the VA doesn’t have minimum credit score requirements for VA-backed loans, your lender will have its own credit score standards. Many lenders require a credit score of at least 640. If you need to raise your credit score to be approved or to get better terms, there are steps you can take to increase it before you apply.
