One of the common questions I encounter as a loan officer is, “Can I get a VA loan if I have open collections on my credit?” This is a pertinent question, especially for veterans seeking housing assistance. The answer is that it can depend on several factors, including the type of collections you have and the interpretation of various lenders.
UPDATED AUGUST 25, 2026: VA HANDBOOK EXCERPT
“Non-medical collection accounts without established payment arrangements are to be included with a calculated monthly payment using 5% of the outstanding balance of the collection divided by 12 months. Borrowers with a history of such accounts should have re-established satisfactory credit in order to be considered a satisfactory credit risk.”
This is a VA rule, and the wording changed. The 5 percent figure is now divided across twelve months instead of being read as the monthly payment, so an unpaid $10,000 non-medical collection with no payment plan counts at roughly $41.67 a month in your ratios rather than $500. That is an illustration of the guideline math, not a quote or an offer of credit. If the account shows a minimum payment on your credit report, the underwriter uses that payment instead. VA has not issued a circular on the change, so some lenders may still be using the old calculation.
Source:
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VA loans are designed to be flexible to help veterans secure financing. Most lenders will also want to see a clean recent housing history when collections show up on your credit, and that part is lender practice rather than a VA rule. In my experience that usually means two years of rent with no late payments or evictions, or a year of mortgage history with no late payments. Chapter 4 itself talks about satisfactory credit generally being re-established after 12 months of satisfactory payments following the date the last derogatory item was satisfied. Lenders can be more forgiving when there were circumstances beyond your control, such as a job loss or a medical event, and the documentation is there to back it up.
The handbook sets the floor, and then a lot of this comes down to lender discretion and judgment. What follows is how different collections tend to play out on real files in my experience, not a list of VA rules:
Medical Collections:Â Generally, medical collections are viewed as less severe due to the common understanding that healthcare costs can be unpredictable. They are unlikely to severely impact your loan approval.
Child Support Collections:Â If you have outstanding child support collections, you may face significant challenges in securing a VA loan, as child support obligations can lead to wage garnishments and a complicated financial profile.
Credit Card Collections:Â Recent collections on credit cards can hinder your approval chances, especially if they occurred within the past year. If these collections are older than a year and you have demonstrated a positive payment history otherwise, your chances of approval improve.
IRS Collections:Â If you have IRS collections, it is beneficial to be on a payment plan. Lenders typically prefer to see you actively managing your obligations.
Utilities and Other Small Collections:Â Smaller collections, like those from utility companies, tend to be more lenient, especially if they are minor amounts (e.g., under $200). In some cases, these collections can be overlooked, particularly if there is an explanation provided.
Not sure where your credit leaves you?
Start the VA Loan PathfinderWould rather just talk? Call or text me at 937-572-3713.
In summary, while obtaining a VA loan with open collections on your credit is feasible, it heavily depends on the type of collections and the interpretation of the lender. The key is to shop around to find a lender who can work with your unique financial situation.
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One more thing worth repeating after the August 2026 handbook change: an old unpaid non-medical collection costs far less in your qualifying ratios than it used to, so paying it off is no longer the automatic move it once was. Talk it through before you send a collection agency money.
I broke that change down in full, with the handbook quote and a table of what a $2,500, $5,000, $10,000 or $20,000 collection now costs you in ratios, in VA just changed how collections count on a VA loan.
The VA handbook now counts an unpaid non-medical collection at 5% of the balance divided by 12 months. A $10,000 collection drops from $500 to about $42.
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