Bad Credit: The Effect On VA Home Loans

Bad credit VA home loans can be obtained since the requirements are less strict than regular home loans. Even so, bad credit can affect how a veteran's loan application is received. The reason why a veteran has bad credit will determine its affect on their ability to receive a lon. Here are common reasons for bad credit and how they affect a VA home loan application.


  • With a generally poor credit history, Veterans risk having their application denied. Bad credit VA home loans may be offered only if the most recent 12 months of their credit history shows timely debt repayment.
  • Isolated incidents of late payments may not affect the approval of a VA home loan if there was simply a period of financial difficulty that has since been corrected.
  • Repeated late payments, judgments, and several delinquent accounts can make it difficult for a veteran to obtain a home loan.
  • Poor credit as a result of Chapter 7 Bankruptcy could cause a VA home loan application to be denied. This is only the case, however, if the veteran lacks an explanation, re-established good credit, or job stability.
  • Veterans paying on a Chapter 13 Bankruptcy may still be eligible if the most recent year of payment have been on time and they show an explanation, re-established good credit, and job stability.
  • Delinquencies on federal debts will disqualify applicants for a VA home loan. Payment arrangements can be made to settle what is due, and this will reopen eligibility.
  • If a veteran has had a previous home loan foreclosed upon within the last two years, they are typically ineligible for a new VA home loan.
  • Minor collections will not affect the approval of a VA home loan application.
  • Any judgments outstanding will freeze the loan application process. All judgments must be paid in full for a veteran to be eligible for a loan.
  • A complete lack of credit history will not negatively affect VA home loan application approval. The borrower should show a record of consistent payments such as phone bills, utilities, or rent.

Veterans have the option of working with a Consumer Credit Counseling Plan in order to correct bad credit and restore eligibility. The agency must approve the veteran for new credit before they become eligible. The most recent twelve consecutive months of satisfactory debt repayment must be recorded.