VA Home Loan Credit Score: What You’ll Need in 2021
Your VA home loan credit score is an important measurement of your finances for lenders. Not only that, the higher your credit score, the better interest rates and terms you can get.
Is your credit score high enough to qualify? Here’s a look at the requirements as of 2021.
What Is the Minimum Credit Score I’ll Need?
The Department of Veterans Affairs does not set credit score guidelines; lenders do, which means the minimum VA home loan credit score can vary.
Many lenders set the bar at 620, which is considered fair credit. The range across all lenders is typically between 580 and 660.
Here’s a look at the credit rating scale for reference. You can see that lenders generally will work with those who have fair to exceptional credit scores.
- 300 to 579 – Very Poor
- 580 to 669 – Fair
- 670 to 739 – Good
- 740 to 799 – Very Good
- 800 to 850 – Exceptional
There are options for those who fall in the very poor credit score category, but it can be tougher to acquire a loan at that level.
5 Ways to Quickly Raise Your Credit Score
Before applying for a VA home loan, it is an excellent idea to review your credit report and see where you might be able to improve your score. Here are five steps you can take to move the needle:
Dispute Credit Report Errors
Request a free credit report from AnnualCreditReport.com, which will give you access to your reports from Equifax, Experian, and TransUnion.
Review all three reports, note any errors you see and dispute them. NerdWallet has a great explainer for how to dispute credit report errors.
Ask For Higher Credit Limits
Raising your credit limit can lower your overall credit utilization, which is an important factor in your credit score.
Credit utilization is the amount of available credit you are using. For example, if you have credit limits on your cards totaling $10,000, and you have spent $1,000 of what is available to you, your credit utilization is 10 percent.
Don’t Close Credit Cards
If you close out a credit card, the lost credit limit will calculate into your overall credit utilization, inflating it. So even though you might be tempted to close out a credit card that is paid off, keep it for now.
Pay Your Bills On Time
Your payment history is the number one influence on your credit score, so paying your bills on time can have a significant impact.
Even if you are not applying for a VA home loan, paying your bills on time is important. Your late payments can haunt you because they can stay on your credit report for 7.5 years.
Make Extra ‘Micropayments’
Anything you can do to lower your overall credit utilization is a smart move. Whenever you have a little extra money throughout the month, throw it on a credit card or loan in between your regular payments.
Remember, It’s Not Based on Credit Score Alone
A VA home loan approval is based not only on your credit score but on other factors such as your employment record, current income, length of military service, and duty status.
All of that put together determines the interest rate you will qualify for and the terms of your loan.
If you are considering applying for a VA home loan, contact us today! We can answer any questions you may have and walk you through the process.
