Maintaining a good credit score is a great starting point if you’re considering a VA loan. What does it mean to have a good credit score?
While different lenders have their criteria for rating credit scores, typically a credit score of 670 is considered fair. The higher the score, the better your rate.
Does the VA require borrowers to have a minimum credit score?
One of the benefits to veterans and the military community is the VA loan program – and the lenient credit requirements.
Most VA lenders do consider credit score standards. However, military borrowers aren’t required to have high credit scores or a perfect credit profile to secure VA financing. VA loans are set up to assist military buyers with accessible and straightforward mortgage loans. However, the minimum score will vary between lenders, but most VA-approved lenders require a credit score of at least 620.
What is the VA’s role in the loan process?
Understanding the role of the VA in the lending process is essential when considering purchasing your home. The Department of Veterans Affairs oversees the VA loan program and guarantees a part of each loan in the event of borrower default. The VA doesn’t issue mortgages, and it doesn’t set the credit score minimums. The VA-approved lender handles these.
Comparing VA loan requirements to other conventional loan lenders
FICO credit scores range from 300-850. If a credit score of 670 is considered fair, and most VA-approved lenders require a credit score of at least 620, you can see how a VA loan may be regarded as borrower-friendly.
The VA does not back conventional loans. Because conventional lenders are at a higher risk of loss by borrower default, conventional loans are harder to obtain. The requirements to be approved for these types of loans may be more substantial down payments and higher credit scores
What happens if credit requirements are not met?
VA loan borrowers don’t have to give up their dreams of buying a home because of low credit scores. Your credit is always changing according to your spending and payment habits. Improve these two, and your credit score will soar.
Knowing what improvements to make is important in managing your credit score, but there are many questions on how and what to improve. Should you pay off high-interest credit cards or other revolving debt? Should you cancel your credit cards?
Ways to increase your credit score
To help hit the mark of the minimum credit score needed to obtain your VA loan, let’s first discuss the five points of how your credit score is calculated.
• Payment history
• Amount of debt owed
• Length of credit history
• Number of open credit accounts
• Types of credit accounts
Before applying for your VA loan benefits, you should know your credit profile. Here’s what you can do to prepare:
1. View your credit, get a free copy of your credit report
2. Review it thoroughly for accuracy
3. Make sure to pay bills on time
4. Focus on credit card bills first
5. Avoid opening new credit accounts
6. Establish objectives to raise your credit score and work to meet it
7. Avoid high credit balances, especially credit cards
8. Set up automatic payments
With a little preparation and the right amount of commitment, you’ll have no problem raising your credit score to qualify for what you’ve earned: the VA loan program.
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