VA Loans and Credit Scores

Veteran and Child Factors for Loan Approval

Lenders work with the borrower’s past credit history looking for several variables to determine if a loan is able to be approved. Many people looking to buy a house want to know what factors go into the lender’s decision, payments made on time in the last 12 months often map out a guide that demonstrates a borrower’s willingness to pay off future credit or loan debt. VA has no minimum credit score requirement; instead, VA requires a lender to review the entire loan profile to make a lending decision. For loan approval, lenders may consider other factors as well such as, late mortgage payments, no credit history, bankruptcy, federal debts, and consumer credit card debt. Let’s explore what lenders are looking for to help move forward in the loan approval process.

No Credit History

Lack of established credit history does not automatically result in a loan denial.  The lender can look at payment history on rent, utilities, phone bills, and others to establish a positive credit history. This is called “alternative credit”. VA has guidelines in place for people with little or no credit history.

Late Mortgage Payments

In instances not involving bankruptcy, sufficient credit is generally considered to be re-established after you or you and your spouse have made payments on time for 12 months after the date of the last negative credit item. The Lender is looking for a pattern of credit behavior rather than single events of slow or missed payments, therefore a period of financial difficulty does not disqualify the borrower if your commitment to making payments has been good.

Chapter 7 Bankruptcy

There is a minimum of two years that must have elapsed since the discharge date of the borrower’s bankruptcy according to VA guidelines. An explanation of the bankruptcy must be provided in full.  The borrower must also continue to re-establish good credit, have a stable job, and qualify financially.

Chapter 13 Bankruptcy

A borrower still paying on a Chapter 13 Bankruptcy may be considered by the VA if the payments to the court have been satisfactorily made and verified for a period of one year.  Also, the court trustee will need to give written approval to proceed. An explanation of the bankruptcy must be provided in full.  The borrower must also continue to re-establish good credit, have a stable job and qualify financially.

Collections, Judgments, Federal Debts

If collections, judgments, or federal debts pending, are in consideration they usually need to be addressed. If a collection is minor in nature, it usually does not need to be paid off as a condition for VA Home Loan approval.  Judgments must be paid in full prior to closing. Veteran borrowers can’t be delinquent on federal debt, including tax liens, student loans, etc. The best way to move forward is to bring all debts up to date to get approved for a VA Home Loan in Colorado.


Is a foreclosure on your record? A veteran borrower with a previous foreclosure or deed-in-lieu of foreclosure within the prior two years is usually not eligible for a VA mortgage. After two years from the foreclosure date, the veteran can apply for a new VA refinance or home purchase.

Consumer Credit Counseling Plan

If a veteran, or veteran and spouse, has prior adverse credit and are participating in a Consumer Credit Counseling Plan, they may be determined to be a satisfactory credit risk if they demonstrate 12 months’ satisfactory payments and the counseling agency approves the new credit.  If your credit is damaged, there is generally a way to turn things around.  A borrower can work with an agency to get your credit past cleared up and ready to move forward into a new home.

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