source:
  type: guide
  id: va-m26-7-ch04-t07
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 7 — Credit History
    - Required Documentation and Analysis
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 7 — Credit
    History - Required Documentation and Analysis.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch04-t07-full
  canonical_id: va-m26-7-ch04-t07-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 7 — Credit History
    - Required Documentation and Analysis
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 7 — Credit
      History - Required Documentation and Analysis
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 84a199d5bffee03b
    fetched_at: '2026-05-23T01:53:52Z'
    content_hash: sha256:ed2c25537e999a4e2d8f0edd102b19b58213237b1a9caa927fddfca170b14a9c
    paragraph_quote: '7. Credit History – Required Documentation and Analysis Change
      Date a. Credit Report Standards February 22, 2019 • This chapter has been revised
      in its entirety. Credit Reports used in analyzing VA loans must be either Three-file
      Merged Credit Reports (MCR), or Residential Mortgage Credit Reports (RMCR).
      The credit report must be less than 120-days old (180 days for new construction).
      For automatically closed loans and prior approval loans, the date of the credit
      report must be within 120 days of the date the note is signed (180 days for
      new construction). If an RMCR is used, the standards applicable to a RMCR include,
      but are not limited to, the following: • The report must be prepared by a reputable
      credit reporting agency. • Each account with a balance must have been checked
      with the creditor within 90 days of the date of the credit report. For each
      debt listed, the report must provide the creditor’s name, date the account was
      opened, high credit, current status, required payment, unpaid balance, and payment
      history. The report must name at least two national repositories of credit records
      contacted for each location in which the borrower has resided during the most
      recent 2 years (separate repository inquiries are required for any co-borrowers
      with individual credit records). The report must include all available public
      records information that is not considered obsolete under the Fair Credit Reporting
      Act (15 U.S.C. § 1681) such as bankruptcies, judgments, law suits, foreclosures
      and tax liens. The RMCR must be an original or electronic report, with no erasures,
      whiteouts, or alterations. The report must contain a 24-month employment and
      residency history. VA may decline to accept a credit report which does not meet
      these standards. If possible, the cost of the credit report must be listed on
      the credit report. If not possible, an itemized invoice identifying the borrower(s)
      is required to verify the cost on the Closing Disclosure Statement (CD) when
      charging the borrower for the credit report. Continued on next page VA Pamphlet
      26-7, Revised Chapter 4: Credit Underwriting 4-50 7. Credit History – Required
      Documentation and Analysis, continued b. How to Analyze Credit The borrower’s
      past repayment practices on obligations is the best indicator of his or her
      willingness to repay future obligations. Emphasis should be on the borrower’s
      overall payment patterns rather than isolated occurrences of unsatisfactory
      repayment. Determine whether the borrower (and spouse, if applicable) is a satisfactory
      credit risk based on a careful analysis of the credit report and other credit
      data. VA does not have a minimum credit score requirement. Rent and Mortgage
      Payment History The borrower’s most recent 24-month rental history and any outstanding,
      assumed, or recently retired mortgages must be verified and rated. Housing expense
      payment history is often a primary indicator of how motivated the borrower is
      to make timely mortgage payments in the future. Absence of Credit History For
      borrower(s) with no established credit history, base the determination on the
      borrower’s payment record on alternative or nontraditional credit directly from
      the borrower or creditor in which a payment history can be verified. Absence
      of a credit history is not generally considered an adverse factor. It may result
      when: • borrower(s) has not yet developed a credit history, • borrower(s) has
      routinely used cash rather than credit, and/or • borrower(s) has not used since
      some disruptive credit event such as bankruptcy or debt pro-ration through consumer
      credit counseling. Accounts in the Spouse’s Name See Topic 2, subsection c in
      this chapter for ECOA and consideration of the spouse’s credit history. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting 4-51 7.
      Credit History – Required Documentation and Analysis, continued b. How to Analyze
      Credit, continued Adverse Credit Data In circumstances not involving bankruptcy,
      satisfactory credit is generally considered to be re-established after the borrower(s),
      have made satisfactory payments for 12 months after the date the last derogatory
      credit item was satisfied. If a credit report reveals numerous unpaid collections
      and/or accounts that are not being paid timely, including some which have been
      outstanding for many years, then once the borrower has satisfied the obligations,
      and then makes timely payments on subsequent obligations for at least 12 months,
      satisfactory credit is considered re-established. Collection Accounts Isolated
      collection accounts do not necessarily have to be paid off as a condition for
      loan approval. A credit report may show numerous satisfactory accounts and one
      or two unpaid medical (or other) collections. In such instances, while it would
      be preferable to have collections paid, it would not necessarily be a requirement
      for loan approval. However, collection accounts must be considered part of the
      borrower’s overall credit history and unpaid collection accounts should be considered
      open, recent credit. Borrowers with a history of collection accounts should
      have re-established satisfactory credit in order to be considered a satisfactory
      credit risk. While VA does not require that collection accounts be paid-off
      prior to closing if the borrower’s overall credit is acceptable, an underwriter
      must address the existence of the collection account(s) with an explanation
      on VA Form 26- 6393, Loan Analysis, for excluding the negative credit history
      they represent. If the collection account is listed on the credit report with
      a minimum payment, then the debt should be recognized at the minimum payment
      amount. Continued on next page VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting
      4-52 7. Credit History – Required Documentation and Analysis, continued b. How
      to Analyze Credit, continued Charged off Accounts These accounts are typically
      collections in which the creditor is no longer pursuing collection of the account.
      The underwriter must address the circumstances regarding the negative credit
      history when reviewing the overall credit of the borrower(s). Disputed Accounts
      Lenders may consider a Veteran''s claim of bona fide or legal defenses regarding
      unpaid debts except when the debt has been reduced to judgment. The underwriter
      should document the reason(s) for not considering an account on VA Form 26-6393,
      Loan Analysis. Judgments Account balances reduced to judgment by a court must
      either be paid in full or subject to a repayment plan with a history of timely
      payments. A history of timely payments would be generally considered as making
      12 payments to reestablish credit. However, in certain cases when a judgment
      has only been in place for a few months, an underwriter could justify on VA
      Form 26-6393, Loan Analysis, a shorter repayment history if the documentation
      indicates the borrower immediately addressed the judgment after it was filed
      and began a repayment plan. Payoff of Unpaid or Untimely Debts For unpaid or
      debts that have not been paid timely, pay-off of these debts after the acceptability
      of a borrower''s credit is questioned does not alter the unsatisfactory record
      of payment. A period of making timely payments on subsequent obligations for
      at least 12 months, then satisfactory credit is considered re-established. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting 4-53 7.
      Credit History – Required Documentation and Analysis, continued b. How to Analyze
      Credit, continued Consumer Credit Counseling Plan If a borrower(s) has prior
      adverse credit and are participating in a Consumer Credit Counseling plan, they
      may be determined to be a satisfactory credit risk if they demonstrate 12 months’
      satisfactory payments and the counseling agency approves the new credit. If
      a borrower(s) has good prior credit and are participating in a Consumer Credit
      Counseling plan, such participation is to be considered a neutral factor, or
      even a positive factor, in determining creditworthiness. Do not treat this as
      a negative credit item if the borrower entered the Consumer Credit Counseling
      plan before reaching the point of having bad credit. Bankruptcy The fact that
      a bankruptcy exists in a borrower (or spouse’s) credit history does not in itself
      disqualify the loan. Develop complete information on the facts and circumstances
      of the bankruptcy. Consider the reasons for the bankruptcy and the type of bankruptcy
      filing. Bankruptcy Filed Under the Straight Liquidation and Discharge Provisions
      of the Bankruptcy Law (Petition under Chapter 7 of the Bankruptcy Code): • If
      the bankruptcy was discharged more than 2 years ago from the date of closing
      for purchases and refinances, it may be disregarded. • If the bankruptcy was
      discharged within the last 1 to 2 years, it is probably not possible to determine
      that the borrower or spouse is a satisfactory credit risk unless both of the
      following requirements are met: Requirement Explanation 1 The borrower(s) had
      obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily
      made the payments over a continued period. 2 The bankruptcy was caused by circumstances
      beyond the control of the borrower or spouse such as unemployment, prolonged
      strikes, medical bills not covered by insurance, and so on, and the circumstances
      are verified. Divorce is not generally viewed as beyond the control of the borrower
      and/or spouse. Continued on next page VA Pamphlet 26-7, Revised Chapter 4: Credit
      Underwriting 4-54 7. Credit History – Required Documentation and Analysis, continued
      b. How to Analyze Credit, continued If the bankruptcy was discharged within
      the past 12 months, it will generally not be possible to determine that the
      borrower(s) is a satisfactory credit risk. If the bankruptcy was caused by failure
      of the business of a self-employed borrower, it may be possible to determine
      that the borrower is a satisfactory credit risk if all four of the following
      are met: Requirement Explanation 1 The borrower obtained a permanent position
      after the business failed. 2 There is not any derogatory credit information
      prior to the self-employment. 3 There is not any derogatory credit information
      subsequent to the bankruptcy. 4 Failure of the business was not due to the borrower’s
      misconduct. Bankruptcy Petition Under Chapter 13 of the Bankruptcy Code This
      type of filing indicates an effort to pay creditors. Regular payments are made
      to a court-appointed trustee over a 2 to 3-year period or, in some cases, up
      to 5 years, to pay off scaled down or entire debts. If the borrower(s) has finished
      making all payments satisfactorily, the lender may conclude that the borrower
      has re-established satisfactory credit. If the borrowers) has satisfactorily
      made at least 12 months’ worth of the payments and the Trustee or the Bankruptcy
      Judge approves of the new credit, the lender may give favorable consideration.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting
      4-55 7. Credit History – Required Documentation and Analysis, continued b. How
      to Analyze Credit, continued Foreclosures The fact that a home loan foreclosure
      (or deed-in-lieu or short sale in lieu of foreclosure) exists in a borrower(s)
      history does not in itself disqualify the loan. Develop complete information
      on the facts and circumstances of the foreclosure. You may disregard a foreclosure
      finalized more than 2 years from the date of closing. If the foreclosure was
      finalized within the last 1 to 2 years from the date of closing, it is probably
      not possible to determine that the borrower(s) is a satisfactory credit risk
      unless both of the following requirements are met: The borrower (s) has obtained
      consumer items on credit subsequent to the foreclosure and has satisfactorily
      made the payments over a continued period, and The foreclosure was caused by
      circumstances beyond the control of the borrower (s) such as unemployment; prolonged
      strikes, medical bills not covered by insurance, and so on, and the circumstances
      are verified. If a foreclosure, deed in lieu, or short sale process is in conjunction
      with a bankruptcy, use the latest date of either the discharge of the bankruptcy
      or transfer of title for the home to establish the beginning date of re-established
      credit. If there is a significant delay in the transfer of title, the lender
      should contact the RLC of jurisdiction for guidance. Deed in lieu or short sale
      For a deed in lieu or short sale, develop complete information on the facts
      and circumstances in which the borrowers) voluntarily surrendered the property.
      If the borrower’s payment history on the property was not affected before the
      short sale or deed in lieu and was voluntarily communicating with the servicer
      or holder, then a waiting period from the date transfer of the property may
      not be necessary. If the foreclosure, deed and lieu or short sale was on a VA-guaranteed
      loan, then a borrower may not have full entitlement available for the new VA
      loan. Ensure that the borrower’s COE reflects sufficient entitlement to meet
      any secondary marketing requirements of the lender. VA Pamphlet 26-7, Revised
      Chapter 4: Credit Underwriting 4-56'
  judgment: false
