Skip to Content

VA Loans When Your Spouse Has Bad Credit

All parties on the mortgage will have to meet VA and lender requirements if considering purchasing a home using your VA home loan benefit, including your spouse.

Married couples often pursue a VA home loan together, with each of them on the mortgage note. There are a host of reasons why, but one of the simplest is that a Veteran may not have enough income to purchase the home of their dreams on his or her own. Making sure you can afford the home you are purchasing is a crucial first step, but adding your spouse can open up some additional opportunities.

While counting your spouse’s income is a big benefit, there’s also a potential downside to having a co-borrower on your VA mortgage. VA lenders will consider your spouse's credit and debts, just like they will yours.

What if My Spouse Has Bad Credit?

While the VA doesn’t set strict credit score requirements, your lender likely does. Most VA mortgage lenders will want to see that both you and your spouse have a credit score of 620 or above. If your spouse falls below that line, you may need to consider qualifying for the loan on your own or wait until your spouse’s credit score improves.

Putting your homebuying dreams on pause can be upsetting, but waiting until you and your spouse can be offered the best mortgage terms is often worth the wait. Interest rates are usually based on the lower of the two scores, which is an added incentive to work hard on your credit before starting the homebuying journey.

Do VA Lenders Base Decisions Off the Veteran’s Credit Score?

VA lenders will take a look at both parties on the mortgage. Whichever score is the lowest is typically what the terms will be based off of, not just the Veteran’s score.

Working on Your Credit Score

Improving your credit score is your best chance at securing a VA loan, but how do you do that? A few basic steps you can take to improve your credit score include making your payments on time, catching up on past-due bills, lowering your credit utilization and disputing any errors you see on your report.

1. On-time Payments

The most important part of your credit score is your payment history. Lenders want to see that you’re fulfilling your present debt obligations before extending any further credit. If you or your spouse have any bills that are currently past-due, catching them up will be your number one priority when it comes to raising scores.

2. Credit Utilization

While carrying small balances on your credit cards can help increase scores, maxing out those cards is seen as a negative by the credit bureaus. Ideally, you want to keep the balances on your credit cards under 30% of the limits all month long. The lower your total credit utilization, the higher that part of your credit score will be.

If you or your spouse don’t have a credit card yet, getting a small, secured card from a bank that reports to all three credit bureaus can be one of the best ways to immediately boost scores. Without an open credit account, you’re missing one of the biggest factors on how your overall credit score is calculated.

3. Dispute Errors

Companies frequently make mistakes when reporting information to the credit bureaus. If you aren’t already using a credit monitoring service, you can receive a free copy of your credit report from all three bureaus once every 12 months through AnnualCreditReport.com. You’ll want to review the information on your report and confirm that everything is accurate.

If you see any accounts you don’t recognize or information you believe is incorrect, you can call the companies directly using the contact numbers listed in the report. This is typically going to be more effective than disputing through the credit bureaus, who are simply reporting what’s being sent to them. Helping the company understand where they made the error will help get the inaccurate information removed from your report as quickly as possible.

Community Property States

While not including your spouse on the mortgage is an easy choice for some, others may not have that option. This is because of community property states.

In community property states, lenders can take your spouse’s debts into consideration regardless of whether or not they are on the loan. If you are in one of the following states, your spouse’s debt will likely impact the amount you can qualify for a VA loan:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin
Top Question via Disqus
Placeholder image of Disqus user

Andrea

Andrea's Question:

We are trying to obtain a VA loan with just my husband (the vet) on the mortgage, but the lender is calculating my debts because we are married. Is this a VA rule or just a lender rule? We live in Arizona.

VA Loan Expert's Answer:

Thanks for writing and to your husband for his service to our country. Arizona is a community property state, so lenders can consider a non-purchasing spouse's debts. Policies on how this works in practice can vary by lender. For example, we will consider debts in a situation like this, but we wouldn't worry about credit score and derogatory credit. Hope that helps. You can talk with a Veterans United loan specialist in more detail at 855-870-8845.

Get VA Loan expertise from the VA Lender more Veterans choose!

Get Started

When factoring in your spouse’s debts to purchase a home in a community property state, it’s generally recommended to keep your debt-to-income ratio (DTI) below 41%.

Explore Other Mortgage Types

If buying a home is an immediate need and you can’t wait until your credit score improves, it could be time to explore different mortgage types with lower minimum credit score requirements. For example, some FHA loan lenders will be willing to approve loans with credit scores as low as 580. This requirement varies by lender, but it could open some doors for you and your spouse.

It is important to note, however, that FHA loans do not come with the same $0 down benefit that VA loans do. But, if you’ve got some room for improvement with your credit scores, the 3.5% down payment of FHA loans might provide another pathway toward homeownership.