What Does my Credit Score Have to be?
The VA does not set any specific requirements for credit scores on any VA loans, since the lenders are going to set their own requirements at whatever they’re comfortable with anyway. For VA streamline loans, the VA’s expectations on how the lender evaluates the credit score and history are even less. Lenders differ widely on what they will approve, and we’ll go over the differences and similarities here to give you a good idea of what you can expect.
It’s fairly common in the VA loan industry for lenders to set a specific minimum credit score that they are not willing to go below in order to approve a loan. While this is a common method, we’ve found that it is not a fair analysis for many veterans who may be suffering from military-related injuries or other tragedies, and may have medical bills or student loan debt that is negatively affecting their credit scores. That veteran may be doing a phenomenal job of managing their money and making their payments, but health care bills, student loan debt, and other expensive debt can make their numerical score seem dismally low. At Low VA Rates, we feel that a more human approach to evaluating borrower credit gives us better results and helps make sure that we don’t turn away worthy borrowers with low credit scores.
What’s beautiful about the VA requirements for the IRRRL, is that they permit a record of the borrower’s payment history on the VA loan that’s being refinanced to stand in lieu of a credit report of any kind. Many lenders still require a credit report even though the VA does not require it, and in many cases, we do as well, but only as needed. Whenever we can, we go straight off the outline the VA provides and look at your current loan payment history. Generally, as long as you are current and you do not have a record of missing payments, that’s all we need to get you a VA streamline. If you want to know if we will need to pull your credit score, give us a call or contact us using our website, and explain your situation. We’d love to help you out.
In the mortgage industry at large, you’ll find it’s very difficult to find financing for a VA loan if you have a credit score under 620. Considering that the minimum credit score for most conventional loans is much higher, and even the minimum for FHA loans is higher than 620, the VA loan industry has very borrower-friendly requirements. here at Low VA Rates, we do not have a hard cut-off at 620, and we approve many borrowers whose credit scores fall below that, but not all loan approvals are created equal. While you can certainly be approved for a loan with a credit score under 620, we still need to protect ourselves from the additional risk, and often the terms that you will be offered are not as advantageous as a borrower with a score in the high 700s might get.
Coming in with a low credit score has the potential to negatively affect the interest rate we offer you on the IRRRL. This is something that can be reasonably expected across the board in every single loan program, not just the VA loan program, and certainly not just Low VA Rates. Closing costs may also be higher for a borrower with a lower credit score, since more man-hours, research, and document acquisition will take place to determine that the borrower is, in fact, a safe bet for us to take on. That being said, the increase in closing costs is not likely to be dramatically higher than they would be for a high-scoring borrower who flies through the approval process.
As far as IRRRLs go, if you were able to qualify for the VA loan in the first place (which you had to in order to get one), unless life has been quite tumultuous since then, then you will likely have no trouble qualifying for an IRRRL. If you’re wondering about credit scores, and are curious to know where your score falls, you can obtain a free credit report from one of the three reporting companies once per year, and here is a scale that you can see where your score falls:
580 or lower (Poor Credit) 580-620 (Ok Credit) 620-660 (Good Credit) 680-720 (Great Credit) 720 plus (Excellent Credit)