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When planning to take a loan, credit score is a major thing that comes into people's minds. It is one of the factors even the banks and other lending institutions check to determine your eligibility.
But does credit score apply to veteran affairs (VA) loans? Well, this article seeks to answer some of these questions to enable you to boost your score.
Apart from learning about the score, it is also essential to understand how to maintain a clean record to allow you to access these loans easily. If you are a veteran or active military personnel, it’s time to learn the artistry of achieving VA loan credit score excellence to better your future.
Understanding VA Loans
VA loans are government-offered loans to active servicemen, veterans, and surviving spouses to enable them to own homes. The loans are also suitable for repairing, buying, retaining, and other housing-related programs.
According to the agency, it only guarantees the loan, but disbursement is by private institutions like banks and mortgage companies. With the government acting as a guarantor, the loan is available at more favorable terms than other loans.
Since VA doesn’t disburse the money, it doesn't dictate the minimum credit score. Therefore, you will be subjected to your lender's credit score requirements, which is why a high score is essential.
Now, let’s delve into the ideal VA loan credit score requirements to achieve homeownership.
What are the VA Loan Credit Score Requirements?
The VA loan credit score requirements depend on the leading bank or mortgage company. Typically, lending companies use a regular FICO system to gauge your creditworthiness. The system uses numbers ranging from 300 to 850 to determine credit scores.
· Less than 580: Poor
· 580-669: Fair
· 670-739: Good
· 740-799: Very good
· 800 and above: Excellent
To qualify for VA loans, you need to score at least 520. However, the higher the score, the more you are eligible to borrow. For instance, if you want to borrow $500,000, the lender will require you to have more rating than when borrowing $100,000.
While credit score plays a significant role in determining eligibility, lenders also check the length of employment and loan-to-value (LTV) ratio, among others.
How to Improve VA Loan Score?
Improving your VA loan score isn’t as complicated as you might think. Even though the loan is only for military and ex-military personnel, boosting your score is just like any other loan. You can achieve high scores by doing the following.
1. Pay Your Bills On Time
If you want your rating to increase, one of the easiest ways is to ensure your bill paying is on time. While forgetting to pay utility bills is common, setting autopay will save you from the mess. Paying the bills on time or before has proved effective in boosting your credit score since companies don’t report them to credit bureaus.
2. Check Your Credit Card Usage
The VA loan credit score requirements depend on the leading bank or mortgage company. Typically, lending companies use a regular FICO system to gauge your creditworthiness. The system uses numbers ranging from 300 to 850 to determine credit scores.
· Less than 580: Poor
· 580-669: Fair
· 670-739: Good
· 740-799: Very good
· 800 and above: Excellent
To qualify for VA loans, you need to score at least 520. However, the higher the score, the more you are eligible to borrow. For instance, if you want to borrow $500,000, the lender will require you to have more rating than when borrowing $100,000.
While credit score plays a significant role in determining eligibility, lenders also check the length of employment and loan-to-value (LTV) ratio, among others.
How to Improve VA Loan Score?
Improving your VA loan score isn’t as complicated as you might think. Even though the loan is only for military and ex-military personnel, boosting your score is just like any other loan. You can achieve high scores by doing the following.
1. Pay Your Bills On Time
If you want your rating to increase, one of the easiest ways is to ensure your bill paying is on time. While forgetting to pay utility bills is common, setting autopay will save you from the mess. Paying the bills on time or before has proved effective in boosting your credit score since companies don’t report them to credit bureaus.
2. Check Your Credit Card Usage
If you have a credit card, it can help you boost or ruin your credit score. Usually, lenders can access your credit card history. If you regularly exceed the maximum limit and delay in repayment, it can negatively affect your rating. Keeping your card in check and repaying your debt on time significantly improves your score. This will give you a higher leverage when applying for VA loans.
3. Limit Your Loan Application
Self-discipline is essential when it comes to loans. While many issues can prompt you to sign a new loan, don’t fall into this trap if you want to build a better VA credit score. Before applying for a new loan or credit, ensure the existing one is closed. Doing this will give your profile a positive score increase.
4. Consolidate Your Debts
3. Limit Your Loan Application
Self-discipline is essential when it comes to loans. While many issues can prompt you to sign a new loan, don’t fall into this trap if you want to build a better VA credit score. Before applying for a new loan or credit, ensure the existing one is closed. Doing this will give your profile a positive score increase.
4. Consolidate Your Debts
It’s common to find yourself in a debt hole due to different loans. Strategizing is a big step toward redeeming yourself and improving your credit score. Paying multiple loans can be draining; thus, seeking loan consolidation can boost your efforts significantly.
Once you settle all loans, you can focus on repaying a single debt, which, once paid consistently, improves the loan score.
5. Verify Your Credit Reports
Low credit scores don’t always result from your faults; they can be due to wrong reporting from the credit bureaus. Always ensure your credit score report is accurate by checking your annual report and filing any errors or disputes. An accurate report is vital since you will need it when applying for VA loans.
Once you settle all loans, you can focus on repaying a single debt, which, once paid consistently, improves the loan score.
5. Verify Your Credit Reports
Low credit scores don’t always result from your faults; they can be due to wrong reporting from the credit bureaus. Always ensure your credit score report is accurate by checking your annual report and filing any errors or disputes. An accurate report is vital since you will need it when applying for VA loans.
What are the VA Loan Benefits Over Conventional Loans?
People usually wonder whether VA loans have benefits over other loans. Some of the advantages of a VA loan are highlighted below.
1. No Down Payment Needed
Once you qualify for a VA loan, no down payment is required. This gives the servicemen and veterans a fantastic way to acquire homes without a down payment, which can be tricky to raise.
2. Low Credit Score Requirements
Although credit score plays a part in accessing VA loans, it is not as high as others. Usually, most lenders require 520 to access more money than conventional loans and mortgages.
3. Private Mortgage Insurance Free Loan
The government guarantees VA loans; therefore, no private mortgage fees are included. This makes these loans advantageous as no insurance fee is needed. Eliminating insurance and down payment means beneficiaries save a lot.
4. Closing Cost Protection
One thing you can’t escape in mortgages is closing costs. But, once you get a VA loan, there is protection against the closing cost veterans will pay.
Conclusion
VA loans are outstanding since they are government-guaranteed. Due to this, the loan comes with lower requirements and offers many benefits.
While the loans are exclusively for servicemen and veterans, you need to watch your steps to keep your rating high and improve the chances of high loans and mortgages.
Follow the suggestions mentioned in the article to achieve excellent VA loan credit scores.
People usually wonder whether VA loans have benefits over other loans. Some of the advantages of a VA loan are highlighted below.
1. No Down Payment Needed
Once you qualify for a VA loan, no down payment is required. This gives the servicemen and veterans a fantastic way to acquire homes without a down payment, which can be tricky to raise.
2. Low Credit Score Requirements
Although credit score plays a part in accessing VA loans, it is not as high as others. Usually, most lenders require 520 to access more money than conventional loans and mortgages.
3. Private Mortgage Insurance Free Loan
The government guarantees VA loans; therefore, no private mortgage fees are included. This makes these loans advantageous as no insurance fee is needed. Eliminating insurance and down payment means beneficiaries save a lot.
4. Closing Cost Protection
One thing you can’t escape in mortgages is closing costs. But, once you get a VA loan, there is protection against the closing cost veterans will pay.
Conclusion
VA loans are outstanding since they are government-guaranteed. Due to this, the loan comes with lower requirements and offers many benefits.
While the loans are exclusively for servicemen and veterans, you need to watch your steps to keep your rating high and improve the chances of high loans and mortgages.
Follow the suggestions mentioned in the article to achieve excellent VA loan credit scores.
Ross is known as the Pambansang Blogger ng Pilipinas - An Information and Communication Technology (ICT) Professional by profession and a Social Media Evangelist by heart.
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