At a Glance

The VA does not have a minimum credit score requirement. Most lenders do, however, it is frequently lower than the threshold for traditional loans. A recent poll reveals that many Veterans overestimate the credit score required for a VA loan.

A solid credit score is a fantastic beginning point for anybody looking for a mortgage, even a VA loan. However, one of the most advantageous aspects of the VA loan program is its lenient credit standards.

Potential borrowers do not need to have spotless credit histories or top credit scores to qualify for VA financing or take advantage of favorable rates and conditions. The VA loan program aims to help as many military purchasers as possible by offering a straightforward and accessible mortgage.

What is the Minimum Credit Score for a VA Loan?

The VA does not require a minimum credit score for VA loans at the program level. Instead, the VA depends on lenders to determine if individuals have a sufficient credit risk.

VA lenders often want a minimum FICO score of 620. High loan amounts, such as those above $1 million, may necessitate a better credit score.

VA lenders typically require a FICO score of at least 620. High loan amounts, such as those exceeding $1 million, may require a higher credit score.

Some lenders may allow lower credit ratings, but these customers are often subjected to additional financial scrutiny and conditions.

At SDVA Homes, we normally aim for a minimum median FICO score of 600. Don’t worry if your credit isn’t up to standard. We have a staff of credit advisers to work on improving your credit score—no strings attached.

See if you meet VA credit guidelines

As you’ll see below, a 620 score isn’t exactly excellent credit. VA loans were designed to make homeownership more accessible to veterans and military members. One of the primary ways this assistance program makes house ownership more accessible is through its flexible and forgiving lending rules.

However, half of all Veterans are either unaware of the type of credit required for a VA loan or expect to confront far higher criteria than is typical. This is according to a new study of Veterans and active-duty military members done by Sparketing in October.

To be clear, credit score minimums vary depending on the lender and other circumstances. However, a common myth regarding VA loans is that Veterans require excellent credit to obtain them, which is simply not the case.

In reality, the average 620 score threshold falls into the “Fair” credit level, which is one step below “Good,” two steps below “Very Good,” and three tiers below “Exceptional,” according to FICO classifications.

VA Loans Credit Requirements Compared to Other Loan Programs

FICO® credit ratings vary from 300 to 850. FICO® no longer provides the median countrywide score; nevertheless, Experian provided a report on February 24, 2023, stating the national average FICO® score stayed steady for 2022 at 714.

Keeping this in mind, a 620 minimum is rather borrower-friendly. It’s not an easy score to get, but it’s a reasonable baseline.

The following are standard benchmarks for other lending program.

Conventional loans:

The government does not guarantee traditional loans. Conventional loans are more difficult to get because lenders are more vulnerable in the absence of a government guarantee. Larger down payments and higher credit ratings are typically necessary to get traditional financing.

According to John Councilman, federal housing chairman for the National Association of Mortgage Brokers, a credit score below 740 may result in increased scrutiny and high costs in the traditional loan market.

As a consequence, most traditional borrowers have high FICO® ratings. According to mortgage software vendor ICE Mortgage Technology, conventional borrowers in 2021 had an average FICO® score of 757.

FHA loans:

The federal government backs FHA loans, just as it does VA loans. The FHA’s requirements enable lenders to accept credit scores as low as 500 with a 10% down payment or 580 with a 3.5% down payment.

Year-to-date Home Mortgage Disclosure Act (HMDA) figures for 2023 reveal that approximately 82% of FHA borrowers had a credit score of at least 625, compared to 92.4% for VA loans.

While FHA loans have lower credit score requirements than VA loans, they sometimes have more costs and less favorable interest rates. Aside from a 3.5% or 10% down payment, FHA loans demand an up-front mortgage insurance cost and monthly mortgage insurance, which runs for the life of the loan.

It is also not unusual for FHA lenders to want a higher credit score than the program itself.

USDA loans:

USDA loans are still another government-backed alternative, although they are only available to rural residents.

The USDA does not need a minimum credit score, although lenders, like other government-backed choices, sometimes do. Most USDA lenders want a FICO® score of 640. The USDA’s Guaranteed Underwriting System requires lenders to have a credit score of at least 640.

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VA Loan Credit Score FAQs

The following are frequent inquiries about VA loans and credit

Why doesn’t the VA set a minimum credit score?

It is critical to understand the VA’s involvement in the VA loan procedure. The VA does not establish a minimum credit score requirement but does advise lenders to make informed decisions.

The VA’s job is to monitor the program and guarantee a percentage of each loan in the event of failure. However, the VA does not provide loans and does not impose credit score minimums. Private lenders are in charge of both of these responsibilities.

Most VA lenders employ credit score benchmarks. Applicants with scores below a lender’s criteria are unlikely to be approved for VA financing. The minimum will vary by lender.

What if I don’t meet the lender’s credit score requirement?

Potential VA loan borrowers should not give up their ambitions of homeownership because of a poor credit score. The finest aspect about credit is its flexibility. Your credit is continually changing.

Improve your financial practices, and your credit score will rise. But deciding what improvements to make can be difficult. Should you pay off high-interest debts? Should you cancel certain credit cards? How should you manage the bankruptcy that is lurking over your credit report?

If you’re thinking about getting a VA loan but need help understanding your credit alternatives, contact the Veterans United credit counsellor team.

Our credit experts help Veterans improve their credit and start on the path to loan preapproval. This free service has helped over 50,000 veterans improve their credit and eventually close on a house loan.

To gain some clarification on your financial condition, call an SDVA Homes consultant at +1 (916) 548-3942 or complete this online form.