The United States Department of Veterans Affairs (VA) can help veterans with credit problems obtain home loans. VA loans were created in 1944 allowing the buyer to put no money down. In the past, any eligible borrower could obtain a VA regardless of their credit history, income, or any sort of documentation. This trend took a serious toll on the economy. Nowadays, the rules for VA loans have been adjusted to work in today’s real estate market.
Bad Credit Mortgage Lenders specialize in getting eligible home buyers with credit challenges to receive VA loans. FICO scores are based on data from creditors to determine a person credit profile. You can still qualify a VA loan if you have a low credit score, or credit issues stemming from the loss of a job, medical conditions, or any other justifiable reason. If you have no credit or short credit history you can still get a VA mortgage by the use of alternative credit.
The following are some things you can do to remedy bad credit or erroneous information that has resulted in a lower credit score:
The credit reporting industry and the way VA lenders assess a credit application has changed in the past few decades. Scores were graded on the recent credit history of the home buyer based on payment history, available credit, type of credit, and the length of credit history. This is expressed as a 3 digit number that can be in the range from 300 to 850. The higher your score, the better you credit rating. VA mortgage credit reports use scores from each of the three major credit repositories: Experian, Equfax and TransUnion. Lenders will average these 3 scores to assess your credit risk.
What if a borrower has short or no credit history? VA lenders usually require at least three lines of credit to qualify borrowers for loans. Traditional credit lines are reported on a credit report and show your payment history and name of creditors. If you have very little or no credit history, VA lenders can use alternative lines of credit to assess your credit.
Alternative credit lines are other regular payments a borrower might have that won’t show up on credit reports. Alternative credit can be shown by proving that you have been making timely payments on things like your phone bill, car payments, or insurance payments. Alternative credit will be accepted by the VA as long as they show at least one year of payment history.
Although the VA doesn’t have any minimum trade line requirements, lenders typically ask that at least two of them are from credit reports. Once you verify those, the alternative credit may be taken into account. The VA understands that credit reports won’t completely be able to show the credit potential of a buyer, especially for military veterans who have been deployed overseas.