Improving Your Credit Score: Part II

Welcome back!

You read the first part of my two-part series regarding Improving your credit score. As promised, in this second part I am going to explain to you a few key financial principles that will help you recover the financial stability and good credit score that you worried were gone forever.

Generally, the closer your FICO score gets to 800, the more likely you are to get great rates and terms on a VA home loan or other lending options. Those with the highest FICO scores follow the tried and tested principles I am covering here.

The First Principle

Pay your debts on time. Period. A history of no commitment to paying debts according to the stipulations of the lender is one of the surest and fastest ways to drain your credit score. Your payment history accounts for 35 percent of your credit score. Late payments can decrease your total score by as much as 110 points.

You may not realize it, but when you pay an old debt, the negative credit listing doesn’t disappear. A paid debt may appear on your credit report as a paid delinquency, charge off, or collection (whatever the case may be). And the label applied to a paid debt might continue to be a drain on your credit score and yell the wrong thing to anyone who you approach for new credit.

If your goal is to repair your credit, merely paying off your debts won’t get you there. You need to work to restore your credit at the same time. And always, a clean slate of paying your debts in a timely manner will help prevent future problems with your credit report.

The Second Principle

Be careful with new credit. It’s not just older credit accounts that get all the attention. High-scoring consumers also know how to use new credit accounts responsibly. Responding to every credit card offer is not going to help your score. In fact, it’s going to hurt your credit profile. Opening numerous credit accounts or having numerous companies pull your score in a short period can be a red flag for FICO’s scoring formula.

The Third Principle

Keep balances in check. DO NOT max out your credit cards. Keep their balances to 30 percent or less of their credit limit. Pay down balances and keep a closer watch on your spending. Just to be clear, having a balance in and of itself isn’t necessarily a major problem. FICO’s analysis shows those with the highest credit scores had an average of four cards with balances.

The Fourth Principle

Build Your Credit History. Younger borrowers may have a hard time with this one. The length of your credit history accounts for 15 percent of your score. On average, those with good credit have been building a credit profile for 10+ years. Going way back, the company found that consumers opened their first credit account, on average, 25 years ago.

The second part of this building a credit history is to dedicate yourself to saving a portion of your take home pay. Nothing can create security like a buffer. Having money in the bank—and having it in a liquid form that you can get two in the case of a true financial emergency—can save your bacon when it comes to keeping you from overextending yourself with credit.

The Fifth Principle

Nobody is Perfect. The best of people make mistakes, financial and otherwise. Unfortunately, some mistakes gravitate to the credit report. FICO found that 1 in 100 consumers had a collection on their credit report. Understand that credit scores are fluid. One missed payment or one collection should encourage you to work even harder to keep balances low and pay bills on time. Don’t let a mistake become a pattern. You can take the right action to raise your credit score, just as surely as an action (or inaction) led to your score’s original decline.

Hey, you can do this! Start now and get things going in the right direction. Staying positive and taking action will build the momentum you need to restore your good credit rating.

Read Part I here

Improving Your Credit and Qualifying for a VA Loan

You are a veteran and you want a VA refinance or a VA mortgage loan. You would also like some advice on how to qualify. Let’s start with good credit. There are few things more important for home buyers than having good credit. You need to know your credit rating. If your credit rating is weak you need to know how to strengthen it. You can make decisions now that will begin to increase your credit score and bring you close to qualifying for that VA loan.

Your financial history and borrowing reputation are the primary deciding factors for a VA lender in determining your interest rate and credit risk. If you don’t have a good credit history and score, your VA lender can deny a loan outright, give you a higher VA loan rate or heavily reduce your borrowing amount. If you think you have bad or weak credit, there are a few things you can do now to fix it:

  1. Get a credit report. US law requires the three main credit reporting companies (Equifax, Experian, and TransUnion) to provide US citizens with one free annual credit report. Go to the credit report website (https://www.annualcreditreport.com) or print out a form through the Federal Trade Commission’s website to obtain your free copies electronically. Otherwise, call toll-free at 877-322-8228, or send a request to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281.
  2. Investigate and correct any mistakes on your report. If you discover a mistake on your report, contact the consumer bureau and creditor immediately. Once you have proved a mistake, it is required to be corrected within 30 days.
  3. Manage your Debts. If current debt is pulling down your credit score, ACT! Initiate a plan to pay your debt down. Talk to your creditors and agree on a reasonable payment plan that is acceptable to all parties. Make your payments as agreed and watch your credit score rise.
  4. You may need professional help from trained debt specialists. Look for a nonprofit group that has a good reputation. Don’t go for a business proposition that promises a quick fix for a steep prepaid fee. Look carefully into your agreement with a company so you are not surprised by any hidden fees, costs, or other clauses that can hinder your financial recovery.
  5. Avoid bankruptcy if at all possible. Bankruptcy filing is a serious blow to your credit score and to institutions being willing to lend you money for any reason, especially banks or other lending institutions being willing to take the risk of financing you into a home.

If You Have Had a Bankruptcy

First of all, in this economy, loan officers are asking for detailed information about your financial history. So don’t take it personally. Underwriters want proof in their files so that can substantiate their decision if they are ever questioned.

If you have had a bankruptcy, here are four things you can do to recover and qualify for a VA mortgage loan:

  1. Your VA mortgage lender wants to see proof that you have been paying your creditors on time since the bankruptcy discharge.
  2. If you are serious about repairing your credit, start small. Get a gas credit care or Walmart credit card, then charge on it and pay it off promptly. The next step in the process is to apply for small secured loans. Don’t pay everything off at one time, but send more than the required payment. If you follow this method you will see a dramatic rise in your credit score over the course of several months.
  3. Avoid non-sufficient funds (NSF) reports on your credit. VA Loan officers will generally allow one NSF, but if they see many or random NSFs throughout your credit report, they will assume you do not manage your money well and that you are a poor credit risk. (If you can’t pay your small bills on time and are bouncing checks on those accounts, how will you make a house payment on time?)
  4. Most veteran mortgage loan officers will have in place a minimum credit score requirement to issue a loan. Therefore, paying attention to your credit score, repairing poor credit, establishing good credit, are all important as you work to reestablish your financial reputation.

What the VA Says to Lenders About Bankruptcy

You may find the following VA loan information to lending institutions helpful to you if you have had a bankruptcy. These points are summarized from the VA’s website concerning bankruptcy:

  • A bankruptcy in your (or your spouse’s) credit history does not in itself disqualify the loan.
  • What are the facts and circumstances of the bankruptcy? Consider the reasons for the bankruptcy and the type of bankruptcy filing.
  • You may disregard a bankruptcy discharged more than 2 years ago.
  • If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that the applicant or spouse is a satisfactory credit risk unless both of the following requirements are met:
    • the applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period, and
    • the bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse

You can make a big impact on your credit history in a relatively short time. It begins by making some simple commitments and decisions that will establish, improve, or restore your good credit. If you have questions about qualifying for a VA mortgage loan (whatever your history), contact us at Low VA Rates.

Get Started With Your VA Loan Today

Low VA Mortgage Rates Stay Low, VERY LOW VA RATE

It seems like I have been telling people for the past 2 years or so that VA interest rates were not going to be going any lower.  There were many times that in that window of time that I was right, however, overall rates, VA rates especially, have continued to go lower and stay low.  It’s the times like right now when I wish for many reasons I had the benefit and blessing of a VA loan.

I bought my home in 2007 and even put down 20% on the purchase of the home.  Bad news for me is not only is all that equity was gone, but I am also stuck at 6.5% rate even though interest rates are at 4.25% for 30 years or 3.25% on the hybrid loan.  I could be saving literally $800 a month or more if I could streamline refinance, but that is not available on a conventional loan.

What is so amazing about the VA mortgage streamline refinance is that you can refinance even if your home has no value or equity.  You could have bought your home in 2007 at 250,000 and now it is worth 175,000, but you can still streamline your VA loan.  Perhaps the downturn in the US economy has affected your credit rating or FICO score?  If this is the case, as bad as that can be, it does NOT disqualify you from the VA streamline program.

Some of the benefits of these extremely low VA rates today are:

  • lots of savings monthly from streamlining
  • easier to decide to streamline
  • the streamline allows you to skip some mortgage payments if done correctly
  • and many more.

If you have a VA mortgage please apply here or give us a call at 866-569-8272 so we can show you what the VA streamline can do for you.

Uncovering Details in your Credit Report

Many people believe that your credit report contains intimate personal details of your life, investigated out from interviews with your neighbors, your ex, and your business associates. Not true! You can rest assure that your credit report does not reveal whether intimate things about you.

The information in your credit report is specific, purely factual, and limited in scope. What is lacks in scope, however, it makes up for in sheer volume of material and length of time it covers. For example if you were to cut class, chances are that no one will notice, but if you fail to pay a bill on time, a multibillion- dollar industry will notice, record it, and tell everyone who asks about them for the next seven years!

Here’s a short list on what’s in your credit report:

Personal identification information such as your name, social security number, addresses (present and past), and your most recent employment history.

Public-record information on tax liens, judgments, bankruptcies, child-support orders, and other official information.

Collection activity for accounts that have been sent to collection agencies for handling.

Information about each credit account, open or closed (also known as trade lines), such as whom you owe, the type of account ( such as a mortgage or installment account), whether the account is joint ( shared with another person) or just in your name, how much you owe , your monthly payment, how you’ve paid (on time or late), and your credit limits.

A list of the companies that have requested your credit file either for promotional purposes (like sending you a great offer) or in response to your request for more new credit. Note: The companies that look at your report for promotional purposes don’t appear on the report that prospective creditors see, but they do appear on the copy you can request for your own review.

An optional message from you that can be up to 100 words in length and that explains any extenuating circumstances for any negative listings on your report.

An optional credit score. Your credit score is, strictly speaking, not part of your credit report but an add-on that you have to ask for, Just as the information in your credit report may vary from one bureau to another, so your score may vary.

Credit report used to be very difficult to read. Most of the data appeared in a nearly indecipherable numeric code, which was mystifying to the average reader. Today, although there’s still room for improvement, credit reports are more readily understood by the average person. Each of the three major credit-reporting agencies reports similar credit information but each in its own unique format. Remember: The credit-reporting agencies are competing with each other for business, so they have to differentiate their products.

Among the list of items not included in your credit report are your lifestyle choices, religion, national origin, political affiliation, sexual preferences, friends, relatives. Additionally, the three major credit-reporting agencies do not collect or transmit data on your medical history, checking or savings accounts, brokerage accounts, or similar financial records.

Veterans and Military Credit Reports

Your credit report contains information about where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home. The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies.

Some financial advisors and consumer advocates suggest that you review your credit report periodically. Why?

  • Because the information it contains affects whether you can get a loan — and how much you will have to pay to borrow money.
  • To make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
  • To help guard against identity theft. That’s when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.

Getting Your Credit Report

An amendment to the FCRA requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

How to Order Your Free Report

The three nationwide consumer reporting companies have set up one website, toll-free telephone number and mailing address through which you can order your free annual report. To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order from only one or two. The law allows you to order one free copy from each of the nationwide consumer reporting companies every 12 months.

You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

Other situations where you might be eligible for a free report

Under federal law, you’re also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, based on information in your report. You must ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company.

You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.

Otherwise, a consumer reporting company may charge you up to $10.50 for another copy of your report within a 12-month period.

There are also a number of different websites that sell copies of credit reports. Some of these are good sources but keep in mind that the scores and information may not be completely accurate. In my experience, it is best to get your report straight from the source.

History of the FICO Score?

The history of the fico score goes clear back to 1956. It was first founded by the Fair Isaac Company, who tried to come up with a better way for businesses to make decisions. The FICO score has come a long way since then. In today’s world, if you don’t have a high FICO score then it can be a challenge to get a house loan, a car loan, a good credit card rate, insurance, and it can even affect whether you get hired at a job or not.

How they calculated the FICO score, up until about the year 2000, was a “big secret.” The Fair Isaac Company wouldn’t share with anyone the formula they used to determine the FICO score. It wasn’t until people seriously protested this secrecy that they finally shared some of the guidelines they use to produce the FICO score. It soon became a law that people should have an admission to know what their scores are.

Nowadays, a good FICO score is an essential thing to have to prevent you from your credit being denied or to keep your interest rates from rising. A very high percentage—higher than 65% —of lenders (such as banks and credit card companies) relies on the FICO score to help them make decisions. It gives them a sound way of telling if someone has the ability to pay back the money being lent to them. It assists them in knowing the risks that are involved if they led to a certain person. Not only do lenders use the FICO score, but also insurance companies, employers, landlords, phone companies, and even the government.

Before the FICO score existed (before 1980), people in business would have to rely on instinct or prejudice to help them determine who to lend to. The FICO score helped take out discriminatory practices that people used. Sometimes—especially when it was first used—there were those who claimed it still had its flaws that involved age, gender, race, or zip code discrimination. It has improved a ton since then, especially since it was required by law for people to see how their score was made up.

Things that can affect your credit score, as people came to find out, is the length of credit history, new credit, payment history, amounts that are owed, and even the types of credit. The score is a statistical analysis of the credit reports of a person that come from credit bureaus (such as Experian, Equifax, and TransUnion), and is expressed in a numerical expression (a three digit number).

The Credit Score is not based on the income someone makes, but rather their ability to pay their bills on time (along with many other such factors). There are many different ways to obtain your own credit score. A score ranges from 300-850.

The history of the FICO score has come a long ways since it was first used. It has become a more reliable way for lenders, employers, and other companies to assist with helping them in decisions. Where it used to be a big secret on how the FICO score was calculated, it is now available for anyone to see and know how their score is designed. Having a high FICO score is extremely important to qualify for almost anything nowadays.

How Military Families can Improve Their Credit

There is good news for those veterans who have bad/low credit scores, and that is that it can be improved! You can take a number of steps to improve your credit score, thus setting a more reliable foundation for future decisions and plans. Especially when it comes to getting approved for a VA loan.

First of all, make sure you aren’t late on any payments. Specifically your mortgage payment or rent, because if you are, it will surely affect your credit score. Be sure to pay off all liens, judgments, and collections that you may owe.

Another thing that will help immensely is to pay down credit card debt along with any other debt you may have. By closing one or two credit cards, it gives you less probable debt open to you. If you are trying to buy a house or get a VA loan, steer clear from closing or opening accounts needlessly. (Opening one could affect your score negatively at first due to taking out more credit….As for closing one, you are ridding yourself from getting the credit from that account, so that could possibly be bad as well for someone who is trying to improve their credit right off.) On the other hand, opening an account for other reasons, such as building your credit history, can be very helpful. In fact, it’s the KEY to building your credit. (Especially helpful after bankruptcy.)

One more strategy to improving your credit score is to confront the credit reporting agencies in writing to make sure everything is resolved that may be mistaken/flawed. You can also send them your bankruptcy discharge papers to be sure they don’t have inaccurate reports (which are not uncommon for them to make mistakes). This will speed the process as they update your report.

If you have a low credit history, it is a good idea to start building it for at least a year before trying to do a VA loan. Learn how to use a credit card wisely. You shouldn’t go over 50% of the offered limit and pay off the balance each month.

As you can see, there are a number of ways to improve your credit history. Whether it’s paying off credit cards, learning how to use one better, getting yourself out of debt, opening an account to build credit, or paying your bills and mortgage on time, each plays an important factor to getting and keeping good credit. It’s a habit-forming process that takes a lifetime of upkeep!

How Credit Cards Affect Your Credit Score

Credit cards can affect your credit score in both positive and negative ways.  What follows are a few of the ways they can impact your credit score.  As you may be aware VA loans and VA interest rates are also affected by your credit score.

Officially closing a credit card account will lower your credit score because it (1) might reduce the length of your credit history, which accounts for 15% of your credit score, and it (2) lowers the total amount of credit you have available, which will raise your debt to available credit ratio.

To illustrate this, assume that one person has two credit cards each with a $5,000 credit limit.  This person habitually carries a $2,500 balance on one credit card.  With two credit cards, this person’s debt to available credit ratio is $10,000/$2,500 [total credit available/total debt].  This means that this person only uses 25% of his overall available credit, which is good.  If he closes one credit card, his ratio is now $5,000/$2,500, which will lower his overall credit score since he is now using 50% of his available credit.


Does this mean that one could open new credit card accounts just to improve his debt to available credit ratio?  Yes, one can, if he or she doesn’t already have too many open credit card accounts.  Too many credit card accounts can also lower one’s credit score.

On the other hand, having an open credit card that you never use can also negatively affect your credit score since, if you don’t use it occasionally, the credit card issuer might stop reporting your activity altogether.   Therefore, use your credit cards occasionally in order to help your credit score.

There is another way that credit card use can negatively affect your credit score, even if you pay off your credit card balances every month.  Suppose that you use your credit card to purchase gas, groceries, and everything else each month, always spending around $1,500 each month, but when the bill arrives, you pay the balance in full.  One would think you would get bonus points for staying out of debt and paying off the balance in full each month, but not when you consider how you look on paper. What is your credit card issuer reporting to your credit report each month — the total amount you owe at the time of the report and that you pay on time, not the fact that you pay your balance in full each month.  Therefore, on paper, it looks like you carry a $1,500 balance on your credit card and never pay it off.   Therefore, a good idea would be to have 2 or 3 credit cards and rotate them, using one for a few months, then using another, so that your credit card company can report a zero balance every few months to the three credit reporting agencies.

Note that in the months immediately preceding applying for any type of loan, particularly a mortgage loan, it would be a good idea if you paid off your credit cards in full and didn’t use them for awhile, giving your credit card issuer at least one month to report a zero balance to the credit reporting agencies.  The amount of debt being reported on your credit report is a very large factor in determining your credit score and the interest rate you will be granted, which could result in paying tens of thousands of dollars in additional finance charges on a mortgage loan.

Leave No Man Behind

These immortal words have become part of the American lexicon. Though the phrase has become synonymous with the US Armed forces, there is some debate as to the origin of its use. The film “Black Hawk Down” lays claim to these words as the motto of Delta Force, the legendary (and still officially unrecognized) special forces unit, a claim supported by Chuck Norris, starring as a Delta Force operative in the eponymous 80’s action flick. Despite this, a simple Google search of the phrase reveals that many contest this fact, including but not limited to Marine Reservists serving in Iraq, Army Rangers, and even armchair historians who claim that the earliest derivation of phrase was coined by none other than Alexander the Great. Whatever the source, the message seems to resonate most with those who have served in combat. With reverent stoicism, it is a pledge of allegiance to the fraternity of soldier hood. Their fears are less tied to notions of self-preservation than how they cherish the lives of their friends, for some the last family they will ever know, and thus the true reminder of home. They are not motivated by the protection the unit offers, as much as they are compelled by the nobility of their membership to it. Theirs is a nobility born amid chaos when the trappings of their normal lives erode, and their consciousness distils into a clear purpose. They serve our country, they serve our values, but most of all, they serve one another.

These tough economic times have made the line between soldier and civilian blurry at best, particularly when one thinks of “leaving no man behind”. Don’t our veterans deserve better than this? What about the veteran borrower returning home after his second tour in Afghanistan, only to find that the home he bought in Detroit for 80k is now worth less than $15k and the manufacturing job he was counting on died with the rest of the city’s work infrastructure? As he falls behind on his payments, how can he not feel even just a bit slighted by the system?

The intent of this post is to offer a hand out to government loan borrowers wishing for assistance on their VA loans. Though there are many options available, few are being utilized effectively. Even if you are only using this post as a means to expand and clarify your options, please, feel free to contact James at a time that works best for you and I’d be happy to answer them.

I. COMMON ALTERNATIVE OPTIONS TO FORECLOSURE THAT WORK

“An ounce of prevention is worth a pound of care.” Benjamin Franklin

Before exploring any foreclosure option, I would recommend checking out the free credit repair for veterans. This is an internal division that provides basic credit management education and assists borrowers with disputing and updating their reports to the greatest point of accuracy. It is said that 70% of all credit reports have errors on them and an astonishing 1 in 4 have errors on them serious enough to prevent someone from getting the credit they are rightfully entitled to.

II. COMMON ALTERNATIVE OPTIONS TO FORECLOSURE THAT WORK

If you wish to stay in your home but have fallen behind on your VA mortgage payments there may be a way to save you from foreclosure. Contrary to popular belief, most lenders don’t want to have to resort to a costly and time intensive foreclosure process, particularly in a housing market such as this one. The following alternatives have been recommended from the VA Borrower Delinquency Page

A. Repayment Plan – The borrower makes regular installment each month plus part of the missed installments.

B. Special Forbearance – The servicer agrees not to initiate foreclosure to allow time for borrowers to repay the missed installments. An example of when this would be likely is when a borrower is waiting for a tax refund.

C. Loan Modification – Provides the borrower a fresh start by adding the delinquency to the loan balance and establishing a new payment schedule.

D. Additional time to arrange a private sale – The servicer agrees to delay foreclosure to allow a sale to close if the loan will be paid off.

E. Short Sale – When the servicer agrees to allow a borrower to sell his/her home for a lesser amount than what is currently required to pay off the loan.

F. Deed-in-Lieu of Foreclosure – The borrower voluntarily agrees to deed the property to the servicer instead of going through a lengthy foreclosure process.

III. Non-VA SPECIFIC ALTERNATIVES TO FORECLOSURE

A. Service Members Civil Relief Act (SCRA) SCRA may provide a lower interest rate for up to one year, and provide forbearance, or prevent foreclosure or eviction up to nine months from the period of military service. In order to qualify for certain protections available under the Act, his or her obligation must have originated prior to the current period of active military service.

B. If VA is not able to help a veteran borrower retain his/her home (whether a VA-guaranteed loan or not), the HOPE NOW Alliance may be of assistance. HOPE NOW is a joint alliance consisting of servicers, counselors, and investors whose main goal is to assist distressed borrowers retain their homes and avoid foreclosure. They have expertise in financial counseling, as well as programs that take advantage of relief measures that VA cannot. HOPE Now provides outreach, counseling and assistance to homeowners who have the willingness and ability to keep their homes but are facing financial difficulty as a result of the crisis in the mortgage market. The HOPE NOW Alliance can be reached at (888) 995-HOPE (4673), or by visiting www.hopenow.com.

IV. DIRECT ASSISTANCE with non-VA Guaranteed Home Loan Veteran’s Affairs

A. For a veteran or service member who may have obtained a conventional or sub-prime loan, VA has a network of eight Regional Loan Centers and two special servicing centers that can offer advice and guidance. Borrowers may visit VA’s Loan Guaranty website at www.homeloans.va.gov or call toll free (877) 827-3702 to speak with a VA Loan Technician. However, unlike the case of a veteran or service member with a VA-guaranteed home loan, VA does not have the legal authority or standing to intervene on the borrower’s behalf. Therefore, it is imperative that a borrower contacts his/her servicer as quickly as possible.

B. VA Refinancing of a non-VA Guaranteed Home Loan

C. Veterans with conventional home loans now have new options for refinancing to a VA-guaranteed home loan. These new options are available as a result of the Veterans’ Benefits Improvement Act of 2008, which the President signed into law on October 10, 2008. Veterans who wish to refinance their subprime or conventional mortgage may now do so for up to 100 percent of the value of the property, which is up from the previous limit of 90 percent.

D. Additionally, Congress raised VA’s maximum loan amount for these types of refinancing loans to $729,750 depending on where the property is located (this limit is significantly higher in Guam, Alaska, and Hawaii). These changes will allow more qualified veterans to refinance through VA, allowing for savings on interest costs and avoiding foreclosure. A VA refinancing loan may help a veteran who is facing a big payment increase.

V. DIRECT ASSISTANCE on VA Guaranteed Home Loan Veteran’s Affairs

C. When a VA-guaranteed home loan becomes delinquent, VA provides supplemental servicing assistance to help cure the default. The servicer has the primary responsibility of servicing the loan to resolve the default. However, in cases where the servicer is unable to help the veteran borrower, Loan Guaranty has Loan Technicians in eight Regional Loan Centers and two special servicing centers who take an active role in interceding with the servicer to explore all options to avoid foreclosure. Veterans with VA-guaranteed home loans can call (877) 827-3702 to reach the nearest Loan Guaranty office where loan specialists are prepared to discuss potential ways to help save the loan.

How Credit Cards Affect a Veterans Credit Score

Credit scores can affect your credit score in both positive and negative ways.  What follows are a few of the ways they can impact a veteran’s credit score which will impact your VA home loan interest rate.

Officially closing a credit card account will lower your credit score because it (1) might reduce the length of your credit history, which accounts for 15% of your credit score, and it (2) lowers the total amount of credit you have available, which will raise your debt to available credit ratio.

To illustrate this, assume that one person has two credit cards each with a $5,000 credit limit.  This person habitually carries a $2,500 balance on one credit card.  With two credit cards, this person’s debt to available credit ratio is $10,000/$2,500 [total credit available/total debt].  This means that this person only uses 25% of his overall available credit, which is good.  If he closes one credit card, his ratio is now $5,000/$2,500, which will lower his overall credit score since he is now using 50% of his available credit.


Does this mean that one could open new credit card accounts just to improve his debt to available credit ratio?  Yes, one can, if he or she doesn’t already have too many open credit card accounts.  Too many credit card accounts can also lower one’s credit score.

On the other hand, having an open credit card that you never use can also negatively affect your credit score since, if you don’t use it occasionally, the credit card issuer might stop reporting your activity altogether.   Therefore, use your credit cards occasionally in order to help your credit score.

There is another way that credit card use can negatively affect your credit score, even if you pay off your credit card balances every month.  Suppose that you use your credit card to purchase gas, groceries, and everything else each month, always spending around $1,500 each month, but when the bill arrives, you pay the balance in full.  One would think you would get bonus points for staying out of debt and paying off the balance in full each month, but not when you consider how you look on paper. What is your credit card issuer reporting to your credit report each month — the total amount you owe at the time of the report and that you pay on time, not the fact that you pay your balance in full each month.  Therefore, on paper, it looks like you carry a $1,500 balance on your credit card and never pay it off.   Therefore, a good idea would be to have 2 or 3 credit cards and rotate them, using one for a few months, then using another, so that your credit card company can report a zero balance every few months to the three credit reporting agencies.

Note that in the months immediately preceding applying for any type of loan, particularly a mortgage loan, it would be a good idea if you paid off your credit cards in full and didn’t use them for awhile, giving your credit card issuer at least one month to report a zero balance to the credit reporting agencies.  The amount of debt being reported on your credit report is a very large factor in determining your credit score and the interest rate you will be granted, which could result in paying tens of thousands of dollars in additional finance charges on a mortgage loan.

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