Your credit score plays a significant role in determining your eligibility for a mortgage, auto loan or a credit card. This means that your credit score is the first thing that lenders into before they offer you a loan or a credit card. Even if you are a military veteran who is applying for a VA Home Loan or VA Loan refinance, you would need to look after your credit score. This is because even though the Department of Veteran Affairs (VA) doesn’t have a minimum score requirement, private lenders would want you to have a decent credit score before they offer you a VA loan refinancing.
Can Credit Score Be Repaired?
As a matter of fact, credit scores can be repaired. All you need is to have a good deal of knowledge about the factors which banks and lenders consider before offering you a loan and find out how you can improve your credit worthiness. In this post, we would be looking into both these matters.
Factors That Lenders Consider Before Offering a Loan
The main thing that a lender wants to know is whether you would be able to repay the loan on time. They use two important parameters to judge that. These are -
Your Credit Score – The most widely used credit score is the FICO Score. FICO scores range from 300 to 850. If your score is 720 or higher, then you are considered to have a ‘good’ score. Similarly, a score below 600 is considered to be a ‘poor’ score. To get a VA Home Loan, you would usually need a FICO Score of at least 620. However, there are a few VA approved lenders who would offer you a loan at a lower core.
Your Debt-to-Income Ratio – Your Debt-to-Income Ratio or DTI ratio is the percentage of your income that goes towards paying your debts every month. Unlike your credit score, there is no such ‘industry standard’ for DTI. You might get a loan even if you have a high Debt-to-Income Ratio but you need to find the right lender for that!
As a matter of fact, credit scores can be repaired. All you need is to have a good deal of knowledge about the factors which banks and lenders consider before offering you a loan and find out how you can improve your credit worthiness. In this post, we would be looking into both these matters.
Factors That Lenders Consider Before Offering a Loan
The main thing that a lender wants to know is whether you would be able to repay the loan on time. They use two important parameters to judge that. These are -
Your Credit Score – The most widely used credit score is the FICO Score. FICO scores range from 300 to 850. If your score is 720 or higher, then you are considered to have a ‘good’ score. Similarly, a score below 600 is considered to be a ‘poor’ score. To get a VA Home Loan, you would usually need a FICO Score of at least 620. However, there are a few VA approved lenders who would offer you a loan at a lower core.
Your Debt-to-Income Ratio – Your Debt-to-Income Ratio or DTI ratio is the percentage of your income that goes towards paying your debts every month. Unlike your credit score, there is no such ‘industry standard’ for DTI. You might get a loan even if you have a high Debt-to-Income Ratio but you need to find the right lender for that!
How to Improve Your Credit Worthiness?
As you might have guessed by now, you can improve your credit worthiness by improving your credit score. You can improve your score by trying out the following things
Apply for Credit – If you are active duty member of the defense forces, the best thing to do would be to apply for loans. As you would get regular paychecks, lenders would be more interested in giving you a loan.
Apply for Secured Credit Cards – If you have a poor credit score, then you can consider getting a secured credit card. To get a secured card, you need to keep an amount of money as collateral which would be the credit line for your card. There are some banks and financial institutions who would offer you such credit card.
Apply for a Revolving or Installment Loan – To give a boost to your credit score, you might think about handling both revolving and installment credits. Open at least 3 credit accounts – use one of them for revolving credit and the others for installment. You can get cards that work on revolving credit. For installment credit, you can take an auto loan as such types of loan are installment loans.
So, these are some of the most effective ways which would help you build your credit score and put you in a better position to apply for a VA loan refinance. You can always get in touch with a reputed VA approved lender in your state or county and get expert advice from about . So, get in touch with the experts today and eliminate all the hurdles to fulfill your dream of buying a home.
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