VA Loan Credit Score-Required Score and How to Build It

by Darrick Ethien Credit score is a projection of a person’s credit worthiness. This is calculated by studying a person’s credit history and awarding points based on a fixed system. Loan lenders approve a loan only when they find the applicant’s credit score to be good. So, what is a good credit score?  In number any score up and beyond 620 is considered good credit score. 620 is only good enough for VA loans because for others, 680 is what defines ‘good’ and an eligibility for a Texas VA home loan.

Good Credit Score for VA Loans
All home loans need a good credit score at the buyer’s part. This fact is verified thoroughly through credit reports. VA lenders also need a good credit score and every application goes through a stringent credit score check. The only advantage with VA loans credit check is that they are approved at slightly lower scores. Still the numbers have placed high at 620 and anything less than that goes into the file of bad credit history and marked ineligible for a loan.

VA Loans Vs Other Loans
VA loans are backed by government funding. VA board takes the onus of the loan and is partly paid by it in case of defaults. Same doesn’t apply to other loans though, hence, the lenders have to be double sure when they decide to fund a loan. This is the reason, why most non VA loans come with costlier interest rates and a huge number on the credit score report. Here is the credit score, each type of loan asks for.

• FHA Loans – 620 Points, minimum
• USDA loans – 660 Points, minimum
• Conventional Loans – 740 Points, minimum
• VA Loans – 620 Points, minimum

Va Loans’ 620 looks like a fair median as compared to other loans. Maintaining a 620 on a credit report is not an easy job, more so, for the veterans. There are times when scores go below that. So what can a veteran do to rebuild a credit score for a VA loan?

Rebuilding Credit Scores
Rebuilding credit scores start with understanding how credit score is calculated. A credit score is calculated in five parts.

• Payment history
• Account Balance
• Length of Credit
• Types of Credit
• Inquiries

Each of these categories contribute a fair share to the numbers with the first contributing the most. Payment history makes for 35% of the score while account balance dominates 30% of it. Experts say, that if a person takes care of the first two criteria, rest get sorted on their own. So, rebuilding should start from timely payments. The second step is to bring down the credit balance to 30%. Anything more than that eats away substantially on the credit scores.

A veteran also has to check for errors on his credit record. On occasions mistakes lead to a bad credit score and fixing them through proper procedures can automatically build a credit score.

Conclusion
Credit scores play the game changer for home loans including Texas VA home loans. VA loans need a lower credit score because they are backed by the government and VA lenders have some kind of surety that they will be paid back some way or the other. Still, VA loans need a whopping 620 on the credit report, which might be a big number for many. If you know you don’t have it on your report, start paying your bills on time and within a few months, you might revive it for a VA loan eligibility.

Darrick is a financial expert who has specialized in the domains such as real estate, mortgage and consumer finance. With his in-depth knowledge and vast experience of these industries, he has helped numerous financial and mortgage companies on operational restructuring and regulatory compliance issues. For the past few years Darrick has been writing regular columns to share his knowledge with the potential consumers and industry professionals by providing insights into the Veteran Affairs (VA) loan. His tips on VA mortgage are quite useful for military veterans, who are looking to buy their dream home to settle down.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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