Can You Get a VA Loan with Bad Credit?

Veterans with Poor Credit May Still Qualify

VA home loans make buying or refinancing a home more affordable for Veterans and active-duty military personnel who qualify. The benefits of VA loans include lower credit score requirements as compared to other loan types. Read on to learn more!

What is the Lowest Credit Score for VA Loans?

At Freedom Mortgage, our current minimum VA loan credit scores depend on whether you want to buy a home or refinance a home.

• We can often accept a minimum credit score as low as 550 when you want to buy a home with a VA loan.
• We can often accept a minimum credit score as low as 550 when you want to refinance and get cash from your home's equity with a VA loan.
• We can often offer an easy credit score qualification when you want to refinance a house with a VA streamline loan.

You will need to meet other credit, income, and financial requirements to get your loan approved. We'll review your credit history and see if you pay your housing costs, credit card bills, and other loans on time each month. Paying your bills regularly for at least the last 12 months helps us determine if you can meet the financial obligations of a new mortgage. We look at your income, assets, employment history, and other loan obligations to decide if you qualify too.

Can You Refinance a VA Loan with Bad Credit?

We can help you refinance and get cash from the value of your home’s equity with a VA cash out refinance. We can often accept a minimum credit score as low as 550 when you want to tap into your home's equity with a VA loan.

At Freedom Mortgage, we can also help you refinance your VA loan with an easy credit score qualification using the VA IRRRL streamline program. This program helps you lower your interest rate with less paperwork and a faster closing.

Just like when you buy a home, you will need to meet other credit, income, and financial requirements to get your refinance loan approved.

VA Loan Credit Score and Financial Hardship

You can still qualify for a VA loan after bankruptcy or foreclosure. A low credit score due to financial hardship also does not automatically render you ineligible for a VA loan. However, there are other qualifications you will need to meet. Read more about how to qualify for a VA loan after bankruptcy.

Does a Lower Credit Score Affect Your VA Loan Interest Rate?

Your credit score can affect the VA loan interest rate you are offered. When you have a lower credit score, you may be offered a higher rate. Similarly, a higher credit score might help you earn a lower rate. VA loans often have competitive interest rates because they are backed by the Department of Veterans Affairs. Ask us what interest rate we may be able to offer you – even if your credit is less than perfect!

Does a Lower Credit Score Affect Your VA Closing Costs?

Your credit score might affect your closing costs if you purchase discount points. Discount points allow you to buy a lower rate on your VA loan. If your credit score results in a higher rate, you may decide to buy discount points to lower it. You may be able to finance the costs of points into your loan amount or you may be required to pay for them in cash at closing.

Ways to Monitor and Improve Your Credit Score for a VA Loan

• Check your credit report. You can get a free report on www.annualcreditreport.com or contact each of the credit bureaus, Experian, Equifax, and TransUnion, to receive your information.
• Look for mistakes. If you find an error in your credit report, work to have it fixed. This can improve your credit score and help you qualify for a VA loan.
• Don't max out your credit limits. Pay down as much credit card debt as possible and keep a low debt utilization ratio. This ratio compares how much credit you are using to the amount of credit you have available. For example, if you have a credit card with a $10,000 credit limit and a balance of $2,500, your debt utilization ratio is 25%.
• Track your bills. Keep a calendar or set up reminders for when bills are due. Paying your bills in full and on time can improve your credit score.

Credit Requirements for VA Loans Versus Conventional Loans

Veterans can also buy or refinance homes with Conventional loans. Conventional loans typically have higher credit score and down payment requirements, however. You will also need to pay for private mortgage insurance (PMI) if you have less than 20% equity in the home. VA loans do not have mortgage insurance, but do come with a VA funding fee. By refinancing, the total finance charges may be higher over the life of the loan.

Last reviewed and updated October 2024 by Freedom Mortgage.