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What Should I Look for in My Credit Report Before Applying?

"What Should I Look for in My Credit Report Before Applying?"

Your Credit Report

Before you apply for a VA loan from VA Loan Spot, there are important factors to consider one of which is your credit report.

“What should I look for in my credit report before applying?”

There is an expansive array of free credit reports out there for your use. Credit Karma and FreeCreditReport.com are a couple of options. Not all of them are 100% accurate, but they are good tools to monitor any changes in your credit score.

At VA Loan Spot, we recommend all of our clients to go directly to the source. There are three credit bureaus: Equifax, TransUnion and ExperianThese sources provide free credit reports and will be your most accurate.

Derogatory Credit Items

After you access any of these free credit reports, there are several things to look. These things are called derogatory credit items.

A derogatory item is considered negative, and typically indicates a serious delinquency or late payments. Derogatory items represent credit risk to lenders, and therefore, are likely to have a substantial effect on your ability to obtain new credit.”   

– Experian

When looking at the derogatory credit items on your report, you want to make sure that they’re all yours. Sometimes there are errors caused by different factors.

Errors to look for in your credit report

  • Applying for credit under different names
  • Errors in reading or entering name or address information from a hand-written application.
  • Inaccurate Social Security numbers
  • Loan or credit card payments were applied to wrong accounts

If you do find any errors, there are ways you can dispute those directly on the credit bureaus’ websites and fix your credit score.

If you did cause some derogatory items, you want to make sure that they’re not within the last 12 months because VA loan lenders will look at is your credit history within this time period.

Mortgage Lates, or missed mortgage payments, are significant derogatory items. If you do have any mortgage lates within the last 12 months that exceed 30 days without payment, you might have to wait another 12 months for them to lapse in order to apply again. At VA Loan Spot, we do accept one mortgage late at 30 days, but those with multiple lates within the last 12 months should wait to apply.

Revolving Debt and Ratios

You should also make sure that the amount you owe on your credit cards and revolving debt isn’t close to the amount that you’re allowed to borrow. This will benefit your overall credit rating.

An infographic showing debt to income ratios

If you owe 35% of the amount you plan to borrow you are in the perfect arena for a VA loan. If you owe anywhere between 35% and 75% of the amount you plan to borrow, you will still be approved for a VA loan. If you owe over 75% of the amount you plan to borrow, you should consider improving your credit rating before applying for another loan and adding another mortgage.

VA Loan Spot is always here to help you. If you need any assistance with reviewing your credit report and deciding if it’s the right time for a VA home loan, please call one of our VA Home Loan Experts at 800.537.2050.

Bobby Atkisson

Bobby Atkisson

Bobby Atkisson is a seasoned mortgage professional who provides high quality financial services to military members and veterans. With over 14 years experience in the lending and financial industry, his mission is to provide high quality mortgage programs with the most competitive interest rates. For expert advice and guidance on VA Home Loans and Refinance, contact Bobby today at 800-537-2050.