Out of all of the components that influence whether or not you are approved for a mortgage, your credit score is perhaps the most important.
Before you apply for a VA home loan, you should learn what your credit score is and what factors play a role in how it is determined.
PAYMENT HISTORY
Your payment history is arguably the most important factor that influences your credit score.
When assigning you a score based on your payment history, all three credit bureaus take into consideration criteria like: â– Late payments
■ Collection activity ■ Defaults ■ Charge offs ■ Bankruptcies
■ Foreclosures ■ Liens and garnishments ■ Judgments
These factors determine 35% of your credit score. Their presence on your credit file can cause your score to fall below the acceptable average of 620.
BALANCES
Along with your payment history, the balances that you carry on open lines of credit also will determine your credit score.
Balances, or the amounts that you owe, account for 30% of that score. When you carry high balances on credit lines, your score may be negatively impacted.
The credit bureaus also consider:
â– Availability of credit on open accounts â– Types of accounts like mortgages, car loans, credit cards, etc.
â– Total amount owed on all accounts including installment accounts
To keep your score as high as possible, you should pay off high balances and keep as much open credit as possible on the reported accounts.
NEW CREDIT AND TYPES OF CREDIT IN USE
New lines of credit as well as the types of credit that you are currently using will account for 10% each in your overall credit score.
Numerous new credit accounts may signal to potential lenders that you are having money issues or that you plan on taking on large amounts of debt.
Likewise, the types of credit that you have open in your name right now indicate how responsible you are in using those accounts and what kinds of financing you can be approved for by other lenders.
The credit bureaus base the score on accounts like: â– Credit cards
â– Installment accounts
■ Car loans ■ Store accounts
■ Mortgages
They will also consider the number of accounts in each of these categories to determine your overall credit score.
AGE OF CREDIT
Finally, the age of your credit file will determine 10% of the credit score assigned to you.
The bureaus will base this number on how old the entire file is and for how long you have been using credit.
As a rule of thumb, newer credit can score lower than credit that has been established for a number of years or even a decade or longer.
These factors play a role in what number the credit bureaus assign you for a final credit score.
You can pay off balances, apply for new credit, or otherwise act accordingly to improve your score and better your chances of being approved for a VA home loan.
Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage.
Be a proud homeowner today. For more details call 480-351-5904 or visit the site www.valoansforvets.com
VA Loans for Vets 7600 E. Doubletree Ranch Road #200 Scottsdale, AZ 85258 Phone: (480) 351-5904 Email: jimmyv@fcbmtg.com