4 Crucial Factors That Affect Your Credit Score and VA Loan


Guaranteed by the United States Department of Veterans Affairs, the VA loan is a specially designed home loan program for veterans, military officers, and their surviving spouses. There are no minimum credit requirements set by the Department of Veteran Affairs for this loan. But lenders who will approve the loan will usually have credit requirements that the homebuyer needs to meet.

And as there is no fixed credit requirement, it varies from a lender to another one. So, you need to ask for quotes from several lenders, compare them, and then determine who to opt for. But what are the factors that can impact your credit score for VA loan in Houston? Here are the ones –

  1. No credit history

Lacking an established credit history is an issue for mortgage lenders. Some might do not have any problem if you have only one credit score, however, it would need to satisfy their in-house benchmark. Borrowers who don’t have a good credit score will often need to wait until they build a credit profile before being able to secure this loan program. Some mortgage lenders may consider non-traditional credit tradelines for homebuyers with a minimal credit history; however, these guidelines will vary by lenders to lenders.

  1. Late mortgage payments

In circumstances that are not involving bankruptcy,  a satisfactory credit score is generally considered to be reestablished after the military officer, veteran, or veteran and spouse have made satisfactory payments for 1 year after the date of the last derogatory credit item(s). Some mortgage lenders may allow VA buyers to have one or more 30-day late payments. But the policies vary by lenders. The account balances that are reduced to judgment by a court should either be paid in full or subject to a repayment plan with a history of timely payments. The policies on judgments can also differ by lender.

  1. Chapter 7 Bankruptcy

The VA guidelines state that a minimum of 2 years must pass by after the discharge date of the borrower and / or spouse’s Chapter 7 bankruptcy – not the filing date. A proper explanation of the bankruptcy will be needed. The borrower should also have re-established a good credit score in order to qualify financially and have a stable income.

  1. Collection and federal debts

Lenders may have a maximum allowable threshold for derogatory credit that can include collection debt. Those caps can differ by lender and other related factors. Homebuyers who have defaulted or are delinquent on any federal debt may need to be on a refund plan with a history of on-time payments. Furthermore, mortgage lenders may not move forward with a VA loan until you are cleared from a federal debt database, called CAIVRS. Get in touch with a loan specialist in case you have defaulted or delinquent federal debt.

Late mortgage payments, no credit history, chapter 7 bankruptcy, and collection and federal debts are some of the crucial things that can impact your credit profile, as well as your ability to get a VA loan. So, consider these before applying for a VA home loan program.

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