In order to fix your credit score for a VA home loan and be eligible, you need to understand how the score exactly works. Credit scores are a reflection of your past loans and your payment histories. They focus most on the last two years of credit. It should be noted here that the older your credit score is, the less important it gets. The score you get is a calculation based on the algorithm developed by Fair, Isaac Corporation. It is commonly known as FICO.
The three bureaus Equifax, TransUnion and Experian have different credit scores but a median of them is taken to determine yours. Scores are based on the following:
– Payment history constitutes 25% of the score
– Account Balances constitute 30% of the score
– Length of Credit Constitutes 15% of the score
– Types of Credit constitutes 10% of the score
– Inquiries constitute 10% of the score
If your score falls below 600, you might not get a loan. You will need to repair your score.
How to Fix It?
The first step you should take to fix your credit score is to double check all the negative information in your file. There could be errors at times that can hurt your score. Ask the VA lender to work with the credit bureau and run checks for any mistakes in the calculation.
If you don?t find a mistake, then you should start focusing on the initial two categories mentioned above. You will need 6 months to a year of regular timely payments to set your score right. Make sure all your account balances and payments are at par. Once this is taken care of, the inquiries and other factors will automatically reduce and you will have your credit fixed.