High credit scores are not a set requirement for the veterans looking to use a VA home loan. However, lenders use credit scores to help determine loan eligibility and the interest rate charged. Credit scores are not sole indicators in the approval process and should not discourage potential home owners from pursuing a VA home loan.
Lenders take a look at FICO scores to determine the risk of the loan going into default. FICO scores focus on the last two years and are broken down into five categories.
A FICO score is determined by assessing the following:
- payment history (35 percent)
- account balances (30 percent)
- credit length (15 percent)
- credit types (10 percent)
- credit inquiries (10 percent)
Most importantly, a credit score helps lenders ensure that a borrower is not given a loan he or she can not afford to pay back.
Low or poor credit scores can be improved by:
- keeping up with payments
- paying back any creditors
- not applying for anymore credit
- maintaining all credit card balances below 20 percent of their limit
If you are interested in applying for a VA home loan and are not sure about your credit, call a USAVA Lending professional to get you on the right path to home ownership.
