It's no secret that credit is key to securing a VA purchase or refinance loan.
While VA loans feature less stringent guidelines than other loan programs, lenders are often looking for a score of at least 640 in the current economic climate. That can still prove a sizable hurdle for some military borrowers.
But there are relatively simple, straightforward techniques you can use to help boost your score.
It’s easy for bad habits to form when it comes to finances. They become ingrained over time, and these routines turn into immutable truths. In some respects, improving your credit score is about breaking a cycle.
Let’s take a look at four effective tools for turning around your credit:
About 1 in 4 credit reports contains serious errors.
Scour your credit reports line by line. Look for any credit cards, installment loans or anything else that shouldn’t be there. If you’re 30 years old and there’s a 17-year-old credit card account on your profile, it’s probably safe to say it isn’t yours. It’s not uncommon to find a foreign account on your report, especially if you have a common name.
When viewing your credit report online, you can easily dispute incorrect items by following the directions on screen. You can also dispute inaccuracies in writing. The FTC has an excellent sample dispute letter.
Either way, make sure to dispute an incorrect item with every credit agency reporting it and not just to one. Each is legally required to alert the others if an investigation determines that there’s something wrong on your credit report, but it’s always a good idea to hit all three.
In some cases, it’s better to take your dispute directly to the source instead of the reporting bureaus. Be prepared to back up your claims with documentation.
You simply cannot make late payments on your obligations without paying a penalty when it comes to your credit score. This is the first thing the credit bureaus will look for when calculating your score. Establishing a history of timely payments will do wonders for your score.
Don’t open a bunch of new credit cards and shift your balances from one to another. That can actually hurt your score. Keeping your balances low — at most 30 percent of the limit — is key. Commit to paying off the debt instead of shuffling it around. It’s also unwise to close unused credit cards to try and bump up your score. Credit history and the length of credit also play a role in determining your score. Closing older cards shortens your history and can negatively impact your score.
Military borrowers with a minimal credit history should tread carefully at the outset. Generally, borrowers in this situation should refrain from opening a bunch of new accounts in a short time because it might actually hurt their credit profile. But there are times when borrowers simply have to do this in order to qualify.
Prospective borrowers can also seek assistance from our Lighthouse Program, a unique wing of Veterans United Home Loans that works with service members for free to build a plan for boosting their credit scores. You can talk with a Lighthouse credit expert at 888-392-7421.
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