So you want a VA loan but you don’t have a great credit score. You’re wondering if it’s possible to get the loan and what you need to do. Whether you’re buying your first home or trying to refinance and pay off some debt that has you weighed down, here are some helpful hints and steps.
What’s a Credit Score? And Misleading Information.
Your credit score can range from 300 (ouch!) to 900 (perfect). What score do you need to get a VA Loan? Most VA loan lenders will want you to have a score of 620 or greater, and some will go down to as little as 580.
You’re likely reading this because your credit score’s not the best. There’s no harm in that. You’ve probably talked to some VA loan lenders, big and small, and discovered that they don’t even want to talk to you if your score is below 620. Or they might talk to you but they’re not even going consider giving you a mortgage. That’s frustrating.
Even worse, some loan lenders may mislead you by making you think the credit score limit is a VA rule. It isn’t. The VA has no rules about credit scores. That doesn’t mean, however, you’re going to get a loan “just because.”
Steps in Getting A VA Loan If You Have A Bad Credit Rating
So what can you do? There are three things you need to do that your lender can get you approved for your loan, regardless of your credit score:
- Explain The Derogatory Items On Your Credit Report
- Tell Your Story
- Spend Time and Actually Do Items 1 and 2 Above
Let’s dive into these:
1. Explain The Derogatory Items On Your Credit Report
Number one, you need to explain the derogatory items on your credit report. What’s a “Derogatory Item”? Your credit report will contain a list of derogatory items, which are considered negative credit instances in your past. These typically indicate items such as serious delinquency of payments, repos on cars, past-due collection accounts, or late payments. Derogatory items represent credit risk to lenders and are likely to have a significant impact on your ability to get new credit.
Anything that’s negative is considered derogatory. So need to take the time to explain these if you want lenders to take the time to approve your loan. To repeat: spend some time explaining your derogatories. Got it?
2. Tell Your Story
The second thing you need to do is tell your story. We’re not talking about a fictional story here. We’re talking about factual. An autobiography, if you will. Tell the lender your story. Lenders have seen people with absolutely horrible credit get approved for loans at low VA rates because some can be empathetic. After all, they’re human too. Good lenders will understand the needs of veterans and that there can be in the past that caused credit issues? Your story is important to them. It needs to be truthful. Explain exactly what caused those late payments a couple of years ago. Explain why did you missed that mortgage payment. Explain what caused that past bankruptcy.
3. Spend Time and Actually Do Items 1 and 2 Above
Lastly, make sure you actually spend time and do items 1 and 2 above. Keep in mind you’re asking lenders to give you a mortgage in spite of all your past credit issues. Lenders would like to give you a loan (after all, they make great money on interest payments) and what they know is that most veterans have an incredible work ethic. Veterans know that to get things in life it takes some sacrifice and takes some effort. So take some effort and create quality explanations of your derogatories and tell your story.
Spend time doing this and you’ll be in a much better position for success in getting your mortgage.
What VA Loan Lenders Should You Deal With?
Check out our article on The Best VA Loan Lenders. It includes a section on the best for those with a poor credit score. As well, here’s a review of the points above in this video from the folks over at Low VA Rates (note that we have no affiliation them).
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