Before borrowers begin their search for a home and finance the purchase with a VA mortgage, one of the first things out of the gate is to get a copy of the credit report. Primarily this is done to make sure there are no errors on the report and if some are found to begin to gather the documentation needed to correct the mistake. Many times the mistake is minor such as an address is listed incorrectly but it can also be major when someone else’s collection account appears out of nowhere. Yet others who review their credit report look for more than just mistakes—they look to see how good or bad their credit is and wondering if their credit is good enough for a VA mortgage. What does the VA require for credit?
VA lenders use credit scores, sometimes referred to as FICO scores in reference to the company that invented the scoring algorithm, when evaluating credit yet the VA does not itself require that credit scores be used, VA lenders have. The VA however does require lenders to determine whether or not the borrower has established a responsible payment history and does not mention a score. Lenders however do set the score and most lenders set the minimum at 640, with a few VA lenders allowing a credit score to be lower at 620.
Either score is really not considered “sterling” credit but in reality “less than average” might be a better description. A 620 score likely means credit balances are at or above the credit limit or there are late payments scattered through the report. Negative credit that is more than two years old gets less attention from the credit score compared to recent bad marks.
The advice for VA borrowers who think their credit is not up to snuff is to contact a VA loan officer and find out for a fact. Don’t assume you have bad credit, consult a VA loan officer who can tell you for certain and if in fact the credit does need some work, the loan officer can provide you with guidance on what you need to do to get back on track.