All too often, potential homeowners who can take advantage of their VA home loan benefit never get to the starting gate because they’re afraid they won’t qualify because of their credit. The VA doesn’t specifically set a credit score requirement but does require VA lenders to provide evidence of decent credit. Not perfect credit, mind you, but decent. Lenders do use credit scores however and most ask for at least a 620 score with some lenders wanting the score to be 640.
The only way to find out what your score for a VA loan may be is to apply for a VA loan with a VA approved lender. The lender then pulls a credit report from the three main credit agencies and obtains three scores, throwing out the highest and lowest and using the middle score. It’s very important to understand that a credit score pulled by a mortgage company might be different, and it very likely is, compared to a credit score pulled by a company who specializes in credit report or fraud alert services. The credit score for mortgages is specifically designed for a mortgage.
So what happens if your score is below 620? Say it’s 580, what can you do to raise it? After reviewing the credit report your VA loan officer provided, you’ll see what’s harming your scores. If you concentrate on payment history and loan balances, you’re on your way to a better score.
Two thirds of a credit score is made up of timely payments and available credit. If you have payments made more than 30 days past the due dates, begin making the payments on time. Second, if you have high balances compared to credit limits, pay down existing balances to approximately one-third of your credit lines. If you concentrate solely on those two segments, after a few months, your scores will gradually begin to rise.