VA Loans and Credit Score Minimums: Requirements Buyers Need to Know

A good credit score is an excellent starting point for anyone considering a mortgage, including a VA loan. However, one of the best benefits of the VA loan program is its relaxed credit requirements.

Potential borrowers don't have to possess blemish-free credit reports and elite credit scores to secure VA financing or get advantageous rates and terms. The VA loan program seeks to accommodate as many military buyers as possible with a simple and accessible mortgage.

If your credit isn't quite up to par, don't worry. We've got a team of credit consultants to work to improve your credit score — no strings attached.

Who Sets VA Loan Credit Score Requirements?

It's important to understand the VA's role in the VA loan process. The VA doesn't set a minimum credit score requirement but instructs lenders to make sound judgments.

The VA's role is to oversee the program and guarantee a portion of each loan in case of default. But the VA does not issue loans, and the agency does not enforce credit score minimums. Private lenders handle both of these duties.

Most VA lenders use credit score benchmarks. Applicants with scores below a lender's standard usually can't be approved for VA financing. That minimum will vary from lender to lender.

Credit Score for VA Loans Compared to Others

FICO credit scores range from 300-850. FICO no longer releases the median nationwide score, but Experian released a report in February that the national average FICO score for 2021 landed at 714. Keeping that in mind, a 620 minimum is fairly borrower-friendly. It's not necessarily an easy score to obtain, but it's an accommodating benchmark when measured against other loan options.

Conventional loans:

The government does not back conventional loans. Since lenders are at greater risk without a government guarantee, conventional loans are tougher to obtain. Bigger down payments and higher credit scores are usually required to snag conventional financing.

According to John Councilman, federal housing chairman for The National Association of Mortgage Brokers, a credit score below 740 could bring on added scrutiny and sizable fees in the conventional lending market.

As a result, most conventional borrowers maintain impressive FICO scores. According to mortgage software provider ICE Mortgage Technology, conventional borrowers in 2021 boasted an average FICO score of 757.

FHA loans:

Like VA loans, the federal government backs FHA loans. Requirements from the FHA allow lenders to go down to a 500 credit score with a 10 percent down payment and 580 with a 3.5 percent down payment. However, lenders often require a higher score.

In the wake of the global pandemic, lender requirements for FHA loans are similar to VA, with many lenders requiring a 620 minimum.

Lender requirements have relaxed, and the average credit score for FHA loan in 2021 landed 672, which is still relatively high compared to the pre-pandemic average of 665 in 2019.

Beyond credit, FHA loans require a minimum of 3.5 percent down, an up-front mortgage insurance premium and monthly mortgage insurance, which runs for the life of the loan.

USDA loans:

USDA loans are yet another government-backed option, but they're only available in rural areas. The USDA does not enforce a minimum credit score, but like other government-backed options, most USDA lenders are looking for a score in the mid 600s.

Falling Short of VA Loan Credit Requirements

Potential VA loan borrowers needn't abandon their dreams of homeownership due to a low credit score. The best feature of credit is its fluidity. Your credit changes constantly.

Improve your fiscal habits, and your credit score will gain positive momentum. But knowing what improvements to make can be tricky. Should you pay off high-interest debt? Should you cancel certain credit cards? How should you handle that bankruptcy looming over your credit report?

If you're considering a VA loan but need help navigating your credit options, get some free help from the Veterans United credit consultant team.

Our credit consultants work (at no charge) on behalf of service members who fall short of VA loan requirements. Working with a credit consultant is a no-cost process, but not necessarily an easy one. Improving your credit requires commitment and hard work. If you're ready to make the necessary changes to pursue a VA home loan, partner with a helpful advocate.

Get some clarity on your financial situation by talking to a Veterans United loan specialist at 855-870-8845 or fill out this online form to get started today.