Seeking VA Loan With Bad Credit? Know What Lenders Consider

Experts may argue over the pros and cons of VA loans, however, there’s no denying the fact that the program offers the easiest access for veterans seeking home loans. One of the advantages is the ability to secure a loan despite having bad credit, which is a boon for servicemen who get little or no time to work on their credit ratings and sometimes don’t have enough money to meet their payment obligations. Lenders approve VA loans with bad credit after evaluating certain aspects of the applicant. The blog enumerate such factors which applicants can work on to boost their chances of securing a loan.

Payment history

Lenders need to ensure the borrower’s ability to meet payment obligations in-time. Providers determine whether the applicant has enough credit needed to obtain a VA loan or not by looking at their payment history and present income. To be eligible, an applicant needs to provide proof of a stable income (at least 24 months of employment) that should be enough to cover monthly bills and mortgage payments. Additionally, FICO credit score of applicants should be 620 or more. Lenders will evaluate payment history with regards to rent, car payments, insurance, and other monthly expenses for applicants with low FICO credit score (<620).

Late payments

It is common knowledge that late payments have a negative impact on credit scores and most loan programs won’t lend to individuals with outstanding payments against their account. The VA loan program, however, does not automatically turn down applicants with unsatisfactory payment records. The program provides loans to borrowers with open collection accounts or participating in a Consumer Credit Counselling Program. Even borrowers who have recently filed for Chapter 13 bankruptcy, are eligible as long as they’re on a regular, consistent payment schedule and can meet the obligations in-time.


Bankruptcy does not play a role in determining an applicant’s credit worthiness if at least two years have passed since the filing. Additionally, filing for bankruptcy will also not have a negative impact on the borrower’s credit if it is due to circumstance beyond their control, such as meeting medical bills. Last but not the least, those who file for bankruptcy protection due to a failed business venture are eligible as long as there is no negative information about them since they regained employment.


Apart from considering the above factors, lenders will also check the number of inquiries on the borrower’s credit report. A significant number of enquiries can have a negative impact on the borrower’s credit and make it difficult to secure a loan. It is, therefore, advisable that borrowers raise an inquiry only when they think it is necessary and avoid disputing every other item that appears on their credit report.


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