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The 5-Step Guide for Improving Your Credit Score

Unless you possess a big chunk of cash, buying a home usually involves borrowing money.

And while VA loans feature relaxed credit requirements, VA lenders can't help but favor responsible borrowers. That’s where the FICO credit score comes into play. Credit scores help lenders immediately assess a buyer’s responsibility with credit. A higher score means that a borrower is more likely to pay back a loan.

If your credit score is less than impressive, don’t panic. Credit scores change constantly. By following these five simple steps, nearly any service member can bring a credit score up to the 640 minimum preferred by VA lenders like Veterans United Home Loans.

1. Check your report.

The best starting point is a thorough review of your credit report. Credit reports contain a list of your open accounts, account balances, credit inquiries, and credit deficiencies (items such as late payments or judgments).

Head to to score your free credit report. Wade through the details with a careful eye on errors or unknown deficiencies. These gremlins need to be addressed to maximize your credit score.

2. Correct errors.

Nearly 80 percent of credit reports contain errors, according to a U.S. Public Interest Research Groups survey. Most of those errors are trivial in nature, but 25 percent of the mistakes are serious enough to scare off a potential lender.

If you notice errors on your report, you’ll need to contact both the author of the report (either Experian, Equifax or Transunion), and the creditor. Note the error, provide supporting documentation, and follow up often to ensure the error has been cleared. Check out the FTC’s recommendations for a dispute letter here.

3. Pay on time.

A late payment can send your credit score tumbling. A 30-day late payment that is reported to a credit bureau can sap 60-110 points from your FICO score.

To impress a lender and snag better mortgage terms, keep your credit score as high as possible. Maintain timely payments on all your debts.

4. Keep balances reasonable.

Using every last cent of your credit can tell a lender that your budget is overstretched.

To send a better message to a lender, keep your balances relatively low. FICO recommends keeping your balance on any one card and across your entire spectrum of cards below 50 percent of your credit limit.

5. Change your habits after foreclosure or bankruptcy.

Foreclosures and bankruptcies can have a big effect on your credit score. FICO reports that a foreclosure can deduct 85-160 points from your score, while bankruptcy can cause a 130-240 point drop.

Your credit score will gradually improve after a bankruptcy or foreclosure, provided that you employ good habits. The bankruptcy or foreclosure will remain on your credit report for 7-10 years after the event, but that doesn’t mean you can’t obtain a VA mortgage during that time. With healthy fiscal habits and a salvaged credit score, VA loans are generally obtainable within 1-2 years after foreclosure and 2 years after bankruptcy.

Talk with a Veterans United loan specialist at 855-870-8845.

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