Denied VA Loan, due to the lack of open credit lines.

Asked by, Sun Feb 24, 2013

I was recently denied a VA loan. The lender tried a manual underwrite, but still couldn't get approval.
My middle credit score is 673, my debt to income is great, but I lack any open credit lines. I am an authorized user on 2 credit cards that are in great standing.
The lender Im using told me to drop the AU credit cards and to open 2-3 credit lines and try again in 3-6 months.
Im concerned that this will drop my score and also, that 3-6 months wont be sufficient history.
Please Help!

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Denise Olson, Home Buyer, Pewaukee, WI
Fri Sep 27, 2013
Also, don't drop the AU credit cards until you have acquired your own credit cards. AU credit cards create a false score on your credit. The score actually belongs to the primary holder of the credit card. You want to make sure you have something else in place before you drop the AU. Easy things to do if you can't get a card on your own would be to put money down into a Certificat of Deposit. Do it at a bank who would be willing to issues you a personal note (loan) which holds that CD as collateral and reports the loan to the credit bureau.
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Denise Olson, Home Buyer, Pewaukee, WI
Fri Sep 27, 2013
I just looked at our credit requirements on VA. I don't see anything in there that says you have to have open trade lines. What I did see is that you have to have a minimum of 620 for a credit score. I just wrote a letter to our scenario help desk to clarify this. email me at I should have an answer by Monday afternoon. Denise Olson
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Robert McGui…, Agent, Denver, CO
Sat Mar 2, 2013

You might want to get a second opinion with another lender. Your current lender may be ok; but it never hurts to compare notes with another lender to make sure you are getting the right information. VA is one of the best ways to get a home loan. they are not as stringent as other loan programs and not not completely credit score driven. Thy my lender - Joe Massey - 303-809-7769.

Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
0 votes
Amy Watt, , Denver, CO
Mon Feb 25, 2013
I would not drop the credit cards. I have already spoken to a VA Senior Underwriter. I work with a great company that can sell to a number of investors.

With the credit score coming from just co-signing you really have no cedit score for underwriting. VA requires a credit score. If you can get a gift for the down payment you can do a FHA loan. Otherwise getting a secure loan against a car or a secure credit card will help. Though a new loan it is secure and will not hurt as badly. your credit score is high enough to take a hit and still be able to do a VA loan.

Please let me know if I can be of ssistance!

Amy Watt
NMLS #257618
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Matt Ackerman, , Denver, CO
Mon Feb 25, 2013
Hi Nick,

I would not drop the AU cards as it might hurt your score. To do a manual underwrite, you would need to have some alternative credit lines... rent, insurance, phone, utilities? I'd be happy to look at your situation if you want to call me. Normally, the lender should be able to give you a specific reason for the denial.

I work at Universal Lending Corporation and we are a locally owned mortgage bank. I can discuss your situation with your senior underwriter who works in the office directly above me.

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Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Mon Feb 25, 2013
Hi Nick,

We will allow borrowers with no credit scores and those who have a "thin" credit history to qualify for VA financing by manually underwriting the loan and using non-traditional credit references - such as rental history, utilities (gas, electricity, water, land-line telephone, cable TV), non payroll deducted insurance (medical, auto, life, renter), internet or cell phone services. 12 month history is needed and all payments must be made on time.

Dropping the AU accounts could hurt your score, as it may remove those accounts completely from your credit report and reduce the average age of your accounts (which plays a big factor in your credit score calculation)... so I wouldn't try that quite yet. Also, to generate a credit score without AU accounts you need 6 months of credit, so you may even lose your credit scores (become "no credit scores") for a short period of time.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
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