Many veterans worry that their credit score will drop after getting pre-approved for a VA loan. A new credit card, furniture financing, missed payment, or unexpected PCS expense can create problems during underwriting and potentially delay closing.
The good news is that most credit score declines during the home-buying process are preventable. Understanding what lenders review between pre-approval and closing can help protect both your credit and your mortgage approval.
Key Takeaways
- Your veteran credit score will benefit from on-time payments while you look for a home. Avoid taking on new debt during the home-buying process whenever possible.
- Credit inquiries will be consolidated if they are made within the same mortgage rate shopping window. Most scoring models typically treat those inquiries as a single mortgage-shopping event.
- The best credit utilization is below 30%, and ideally, below 10%. This could also help protect your credit.
- You could negatively affect your debt-to-income ratio by financing new furniture, vehicles, or even appliances.
- There is no credit score requirement in the VA loan program; however, lenders may have individual requirements.
- Don’t open new lines of credit if you don’t need to, and try to keep older accounts open, as the length of your credit history is very important.
Why Can a Veteran’s Credit Score Drop During the Home-buying Process?
It’s easy to get caught up in the process of selecting a home. But how will your daily financial habits impact your mortgage approval? Before we cover how to prevent it from happening, let’s explore what the lender looks at between application and closing:
A credit score usually doesn’t decline from simply applying for a mortgage. Your score more commonly decreases when you accumulate debt, miss a payment, or increase your credit card balance while processing your mortgage.
Which Credit Behaviors Matter Most Between Pre-Approval And Closing?
Lenders consider several factors when assessing the risk of extending credit, particularly for mortgages. Payment history accounts for the largest portion of most credit scoring models.
Thus, even a single late payment during the home-buying process can create problems for both your credit score and your mortgage approval.
- Payment history.
- Credit card balances.
- Income-to-debt ratio.
- Balance on credit accounts (revolving balances).
- How long is your credit account history?
- Number of new applications in your report.
Here are some behaviors that could have a negative impact:
- Payment delays.
- Opening new credit cards.
- Purchasing furniture or appliances via a financing plan.
- Auto loans.
- Personal loans.
- Co-signing for another party.
- Closing older credit accounts.
Some lenders review your credit a third time before actually funding your mortgage. Making substantial financial changes may also lead to new underwriting requirements.
Why Does VA Loan Flexibility Not Mean Veterans Can Ignore Credit?
No, you won’t find an official minimum score. Veterans often hear there isn’t one, and yes – it’s true there isn’t a VA minimum. But lenders can and do analyze an applicant’s credit during the VA loan process.
You can get approved for a VA loan even with bad credit. It’s just the lenders who look at things like your income, residual income, debts, payment history, and spending habits that matter in the end.
Can You Get a VA Loan With Bad Credit?
Many veterans can qualify for a VA loan despite past credit challenges, but approval standards vary by lender. You might have lenders turn you down and tell you that you need a score above 620. Other lenders accepting you if you’ve got other compensation, such as:
- Consistent job
- High residual income
- A low DTI
- You have a history of paying bills on time
- You have offsetting financial assets
You need to shop around for a VA-friendly lender, not give up before you even try because of your credit score.
What Should Veterans Do Before Applying for a VA Mortgage Pre-Approval?
The strongest VA loan applications often begin several months before a lender pulls credit. Getting things started early goes a long way towards securing approval and getting fewer nasty surprises.
How Should Veterans Go About Reviewing Their Credit Reports And Resolving Errors Upfront?
Take a close look at your reports from all three bureaus several months before applying for pre-approval with a VA loan lender.
Check for:
- Out-of-date balances
- Errors about late payments
- Duplicate entries
- Fraudulent items on the report
- Collection accounts that do not belong to you
Correcting your errors will allow the credit bureaus to address those issues prior to a loan underwriter assessing your VA home loan application.
Start thinking about your financing well before you look at houses. Many military families work with experienced VA-focused real estate professionals, such as Ginger Varga, to identify potential credit concerns before beginning their home search. Create a plan to avoid common financial mistakes that could affect your mortgage approval. You’ll keep your loan safe from the final underwriting.
How Low Should Veterans Keep Credit Card Balances Before The Lender Pulls Credit?
Credit utilization is one of the most important indicators in credit score calculations. Banks say you should keep the balance as low as possible and even suggest keeping it at or below 30% utilization. You can get results by keeping balances under 10% utilization.
| Available Credit Limit | Balance | Utilization |
| $10,000 | $3,000 | 30% |
| $10,000 | $1,000 | 10% |
| $10,000 | $500 | 5% |
Decreasing outstanding revolving balances before applying helps your overall credit file and your debt-to-income ratio.
The Significance of Utilization
Credit utilization measures how much of your available revolving credit you’re using. For example, a $1,000 balance on a card with a $10,000 limit equals 10% utilization. Lower utilization generally signals lower risk to lenders and may help support stronger credit scores during the mortgage process.
Watch your credit during a military move. Buying in a PCS move? You’ll want to avoid a major credit card buy before the mortgage is complete, said Ginger Varga, housing expert for veteran buyers. Many VA lenders recommend keeping credit card balances low and avoiding new debt until after closing.
What Documents Can Help Strengthen A VA Loan File If Credit Is Thin Or Imperfect?
Veterans lacking the necessary credit may augment their application with these:
- LES statements
- W-2 forms
- Tax returns
- Bank statements
- Rental payment records
- Utility payment history
- VA disability income records
- Retirement income documents
Why Doesn’t My Mortgage Score Match My Banking App Score?
Some vets panic when their score from a bank app doesn’t match a report from their loan company.
This can happen, as most consumer score apps provide a teaching-oriented version of your credit score. In contrast, banks that use unique mortgage scores do their own calculations.
This means that:
- The scoring that the mortgage lender uses may be lower than what you see.
- The mortgage company’s score may be higher than your bank’s.
- Different credit scores give more weight to different categories and behaviors.
Vets shouldn’t pay any mind to an app version of the credit score when considering what their lender has access to.
How Can Veterans Compare VA Lenders without Unnecessary Hard-Inquiry Damage?
The right lender is a wise financial choice. There is good news to this, though. It also recognizes that lenders understand that many people compare mortgage lenders before selecting one.
How Does The Mortgage Rate-Shopping Window Protect A Veteran’s Credit Score?
A mortgage inquiry typically causes a small, temporary decrease in your credit score.
Fortunately, most updated scoring models take mortgage rate shopping into account.
Most modern credit scoring models treat multiple mortgage inquiries made within a short shopping period as a single inquiry.
It gives veterans the chance to review:
- Loan interest rates
- Lender fees
- Closing expenses
- Service and help
Specialization of each lender concerning VA loan programs. Veterans should endeavor to compare lenders within a specific period.
Which Non-Mortgage Credit Applications Should Veterans Delay Until After Closing?
Don’t apply for:
- New credit cards
- Auto loans
- Buy-now-pay-later agreements
- Furniture financing
- Personal loans
- Store cards
Even adding more debt than you currently have is sure to affect underwriting calculations.
What Should Veterans Avoid After Pre-Approval and Before Closing?
Though pre-approval on your VA loan is huge, your financial situation will still be examined before you secure your funding.
During this period, staying consistent generally works to your advantage.
The table below shows how common financial decisions can affect your VA loan approval between pre-approval and closing.
| Credit Action | Potential Impact on Your VA Loan |
| Opening a New Credit Card | New inquiry and additional available debt |
| Financing Furniture or Appliances | Higher debt-to-income ratio |
| Taking Out an Auto Loan | Increased monthly obligations |
| Missing a Payment | Potential credit score decline |
| Co-Signing for Someone Else | Added liability and debt exposure |
Why Can New Debt, Co-Signing, Or Financing Furniture Create A Closing Problem?
New debt changes the lending profile that was initially considered and underwritten by the creditor.
Finance Purchases:
- Furniture
- Appliances
- Electronics
- Vehicles
These will most likely increase your monthly expenditures and your debt-to-income ratio.
Signing to borrow jointly for another person will pose a risk, as lenders view it as one of your outstanding obligations, too.
Why Should Veterans Usually Keep Old Credit Accounts Open Until After Closing?
Keeping your old accounts open contributes to the length of your credit history and the amount of credit you have access to.
When you decide to close credit accounts, you could wind up in the following situations:
- Reduce the total amount of credit you can invest.
- Increase your utilization portions.
- Decrease the average chronological age of your credit reports.
For the average borrower, it is most reliable to keep your oldest credit accounts open until after your loan closes.
How Can Veterans Avoid Missed Payments during PCS Orders, Deployment, or Escrow Stress?
Military moves mean that changing situations and unexpected costs come hand in hand.
Veterans can reduce the risk of missed payments by:
- Automate pay
- Create reminders
- Pay by schedule
- Check the account frequently
- Check bills
- Address any missing payments and changes
- Address any changes in billing addresses
- Build an emergency fund
Being a reliable payer is one of the key habits that can build your credit score.
Example: A DFW Veteran Protects His Credit during a PCS Move
Moving to Fort Worth from North Carolina, this veteran had a VA loan pre-approval in hand when they started shopping. Back home in N.C., they decided to look at getting furniture for their new Texas home, but spoke to their VA loan expert.
Ultimately, they chose to postpone furniture financing until after closing, avoiding any financial risk before settling into their new home. Staying clear of any new debt, paying everything on time, and not running up credit card balances prevented further underwriting.
Common Credit Myths Veterans Hear
| Myth | Reality |
| Mortgage shopping ruins your credit score. | Multiple mortgage inquiries within the mortgage rate-shopping window are often treated as a single inquiry. |
| Closing credit cards improves credit scores. | It can reduce available credit and affect the length of credit history. |
| VA loans ignore credit scores. | Lenders still evaluate creditworthiness and overall financial stability. |
| Financing furniture after signing a contract is harmless. | New debt can affect approval before closing. |
What Should Veterans Do If Their Credit Score Drops Before Closing?
A temporary drop in your credit score does not automatically mean your loan will be denied. The key thing is to call up your lender right away and let them know what’s up. They can then decide whether more paperwork is needed.
What Should Veterans Tell Their Lender Before Trying To “Fix” Their Scores Themselves?
Immediately contact your lender if:
- The score falls surprisingly low.
- Payments are missed.
- New collection accounts turn up on the reports.
- The debt balances suddenly jump significantly.
- You open new accounts, and more credit comes your way.
- Never take a large step before getting advice from your lender!
How Can A VA-Friendly Realtor Help Keep The Transaction On Track?
Your Dallas-Fort Worth Realtor knowledgeable about VA financing will spot issues early, before they delay closings.
Military families in Dallas-Fort Worth, and in fact across the DFW Metroplex, really appreciate the stress reduction that comes with working with a knowledgeable realtor.
Working with experienced VA professionals can help military families avoid common financing mistakes.
How Ginger Varga Helps Veterans Avoid Financing Mistakes?
Choosing a home for a military move usually comes down to a rapid succession of tough choices.
Ginger Varga partners with the Dallas-Fort Worth Metroplex’s military service members and their families to move toward homeownership, ready for anything. Ginger Varga helps buyers make smart choices when searching for new homes.
Together, they coordinate with VA loan programs, manage their home’s closing timeline, and review local market statistics to keep the move on schedule and avoid financing issues.
What Final Credit Checklist Should Veterans Follow Before Closing Day?
As closing day approaches, keeping your finances stable becomes even more important. What you’ll want to do now is keep your credit situation steady, like it was when you got it approved in the first place.
Final Checklist
- Be punctual in paying bills.
- Keep your credit utilization ratio under 30%.
- Please aim for under 10% utilization.
- Don’t open any new accounts.
- Don’t co-sign on loans.
- Leave your old credit cards open.
- Check all your accounts often!
- Notify your lender of any major life changes.
- Don’t lose or quit your job.
What Can Safely Wait Until After The Loan Funds?
You should wait until after the closing on almost anything, for example:
- Purchasing furniture
- Purchasing appliances
- Purchasing vehicle
- Financing those purchases.
- You are opening credit cards.
- You are taking out personal loans
- Making large personal purchases out of pocket
90-Day Credit Protection Plan for Veterans
- 90 Days before Applying
- Review credit reports
- Dispute errors
- Monitor payment history
60 Days before Applying
- Pay down revolving balances
- Avoid new credit applications
- Reduce unnecessary debt
30 Days before Applying
- Gather financial documents
- Monitor utilization levels
- Avoid large purchases
After Pre-Approval
- Maintain on-time payments
- Keep balances stable
- Avoid financing purchases
Before Closing
- Keep finances consistent
- Communicate changes immediately
- Follow the lender’s instructions carefully
What Does the VA Recommend?
The VA recommends you organize your finances in advance as you approach buying a house.
Home buying preparedness often includes:
- Preparing Your Finances Early
- Establishing a Payment History
- Staying Out of Debt
- Gathering Documents
- Prepare For The Responsibilities
Taking these steps beforehand will make the process much smoother and allow you to avoid a needless delay.
Why Credit Preparation Matters in Competitive Texas Markets?
Veterans shopping for homes in Dallas, Fort Worth, Frisco, McKinney, Arlington, or other DFW communities will often find that the housing market has picked up.
A financially secure borrower is ready for the market: The benefits of maintaining strong credit are numerous and can assist buyers to:
- Move quickly as the opportunity occurs.
- React and adjust promptly.
- Diminish delays related to loan acceptance.
- Enhance their overall home-buying journey.
Credit repair does not provide approval, but it helps veterans secure a dream home.
Ginger Varga — Serving Those Who Served, One Home at a Time.
If it comes down to it, guarding your credit when buying a home is less about strengthening it and more about avoiding costly mistakes. Make sure to pay bills on time, limit credit card balances, and resist taking on additional debt until after the ink has dried.
Ginger Varga guides veterans, active-duty service members, and their families through every aspect of the home-buying process. She helps buyers identify their financing options and the best path to VA loan approval, even for buyers with little or no credit history.
Ginger connects her clients with Dallas VA lenders experienced in our community and educates her military families about the local real estate market to ensure they are prepared to buy a home here.
The VA home loan benefit was earned through service. Protecting your credit throughout the home-buying process helps ensure you can fully take advantage of that benefit when it’s time to close on your new home.
Don’t leave your home purchase up to chance. Work with an expert, build a plan, and protect your financial interests now, and then call Ginger today!
Frequently Asked Questions
1. Can A Veteran Qualify For A VA Loan With No Credit Score?
Yes, some lenders offer VA loans without a credit score by looking at a range of other credit factors. This might include credit for past and current rents, utility payments, insurance premiums, phone bills, and any other consistent recurring financial responsibilities. It depends on the specific lender, the stability of the borrower’s income, and their financial situation.
2. Do VA Lenders Use The Same Credit Score Veterans See In Banking Apps?
Generally not. Many banking apps present consumers with more general credit scores, while lenders use proprietary mortgage score models. For example, the VA mortgage credit score used for loan pre-approval may differ from the one reported by online services that provide a view of the score.
3. How Do Joint VA Loan Applications Work If One Spouse Has A Lower Credit Score?
Lenders will assess each spouse’s income, debt, and credit. It won’t prevent loan approval on its own. Still, it might affect the underwriter’s decision to grant you a mortgage or the amount you qualify for. If one spouse’s score is lower than the others’, the lender might consider additional factors when determining whether the loan can be approved and at what price.
4. Can VA Disability Income Help If A Veteran’s Credit Score Is Lower?
Yes. VA disability income is generally considered a stable and reliable income by mortgage lenders. Strong disability income, low debt obligations, and a history of on-time payments can help offset some credit weaknesses during underwriting.
5. Can BAH and BAS Help A Veteran Qualify For A VA Loan?
Yes, BAH and BAS usually qualify as “counting income”. These benefits improve purchasing power, increase veterans’ ability to meet lenders’ income requirements, and help keep debt below the set debt-to-income ratio.
6. Can Medical Collections Affect A Veteran’s VA Loan Approval?
Yes, the impact on your underwriting guidelines can vary across lenders and with your overall credit profile, depending on how collections are treated. Veterans should discuss collection accounts with the lender as soon as possible to determine what additional documentation or payment might be needed.
7. Should Veterans Use Credit Repair Companies Before Buying A Home?
Avoid paying a company for what is essentially a free process. You can dispute credit inaccuracies and correct factual information directly with the big three credit bureaus without paying a fee under federal law. Before you hire an outside agency, talk to your mortgage lender to understand your credit status and what needs to be fixed.
8. Is It Safe To Freeze Credit During The Home-buying Process?
By blocking access to your credit reports, a freeze helps protect your sensitive data from identity theft. Yet, experts stress that veterans must alert their lenders before placing one, as lenders need access to credit reports to manage closing, underwriting, final approval, or quality control.
9. Can Student Loans Affect A VA Home Loan Even If Payments Are Deferred?
Yes, your deferred payments on student loans are generally included in a lender’s debt-to-income calculation. The specific dollar amount the lender will include will be determined by the lender’s accounting rules and the proof of payment you provide.
10. How Long Should Veterans Wait After Closing Before Opening New Credit?
It is in the borrower’s best interests to refrain from using their new credit until after the mortgage has been fully funded and recorded. At that point, they are generally free to apply for additional loans, as their newly approved mortgage should not be adversely affected.
