Denied For A VA Loan? It's Not Your Credit Score - It's Your Lender

When it comes to VA loans, one of the most common questions is: What is the minimum credit score required? There’s a lot of conflicting information out there—some say 580, others say 620, 640, or even 680. So what’s the real answer? Let’s break it down and clear up the confusion.

The Truth About VA Loan Credit Score Requirements

The most important thing to know is that the VA does not impose a minimum credit score requirement for VA loans. That’s right—there is no official minimum credit score required to qualify for a VA loan. This guideline comes directly from the VA Lenders Handbook 26-7, which governs how VA loans are handled across all lenders.

However, this is where things get tricky: Lenders can set their own credit score requirements. This is known as a lender overlay—extra guidelines imposed by the lender that go beyond what the VA requires. For example, one lender might require a 620 credit score, while another might allow a 580. If you’re denied a VA loan due to credit score, it may not be because of VA guidelines, but rather the specific lender’s policies.

The Role of Credit History Over Credit Score

While credit score is a factor, VA loans focus more on credit history than just a number. Here’s why:

• The VA understands the unique financial challenges of military life—deployments, frequent moves, and unexpected expenses can all impact credit.

• Instead of a strict minimum score, lenders look at your last 12 months of credit history to assess stability.

• Even if you have a low score, showing consistent, on-time payments over the past year can significantly improve your chances of approval.

How VA Loans Assess Creditworthiness

When evaluating a VA loan application, lenders look at more than just your score. They consider:

• Payment history – Have you made on-time payments for at least the last 12 months?

• Debt-to-income ratio (DTI) – Can you afford the mortgage payment based on your income and current debts?

• Recent financial behavior – Have you taken steps to improve your financial situation?

Examples from Experience

Having worked on over 600 VA loans nationwide, I’ve seen a wide range of credit situations:

• A borrower with a 740 credit score was denied due to unresolved credit issues.

• A borrower with a 506 credit score was approved because they had a solid 12-month payment history and met other lending criteria.

What About Major Credit Events?

The VA is also more lenient than other loan programs when it comes to major credit events like bankruptcies, foreclosures, and short sales:

• Chapter 7 Bankruptcy – You must wait two years from the discharge date.

• Chapter 13 Bankruptcy – After 12 months of on-time payments, you can qualify with court approval.

• Foreclosures – A two-year waiting period applies.

• Short Sales – You may qualify immediately if your mortgage was current at the time of sale.

Should You Pay Off Collections Before Applying?

One common misconception is that paying off old collections always helps your credit. However, sometimes paying off a collection can actually cause your score to drop temporarily. Before making any major financial moves, consult with a VA loan expert to ensure you’re taking the right steps.

The Importance of a Soft Pre-Approval

If you’re unsure about your credit standing, the best first step is a soft pre-approval. This allows us to:

• Review your financial situation without a hard credit pull.

• Identify key areas to improve before applying.

• Create a tailored plan to increase your creditworthiness.

Final Thoughts

The VA loan credit requirements are much more flexible than many people think. Rather than focusing solely on credit scores, lenders evaluate overall credit history and financial stability. If you’re considering a VA loan and aren’t sure where you stand, let’s chat! We can help you understand your credit situation and create a plan to get you on the path to homeownership.

Got questions? Reach out, and let’s get started!

Nuke out.