While the VA doesn’t directly issue and edict requiring a minimum credit score, VA lenders do. The VA guidelines tell lenders that in order to receive the VA loan guarantee; the VA lender must certify the veteran has demonstrated a responsible credit history. Historically this was accomplished by reviewing, line by line, the credit entries on a veteran’s credit report. And while this is still done to some degree, lenders are most concerned with a score and the most common minimum score anywhere between 620 and 640.
Credit scores are comprised of five main components along with the amount of each category’s contribution to the score:
· Payment History 35%
· Available Credit 30%
· Length of Credit History 15%
· New Credit 10%
· Types of Credit Used 10%
For those trying to squeeze out an extra few points on their score, the last three certainly need to be paid attention to. But for certain borrowers who need some major credit repair applied, concentrating on the first two categories will provide the biggest bang in the shortest period of time as those two categories alone count for nearly two-thirds of the total score.
Payment history simply means making the minimum required monthly payments on time, specifically no more than 30 days past the due date. Available credit is a mixture of existing credit limits and current balances. The ideal balance-to-limit ratio is approximately 33 percent, or one third of the total credit line. For instance, a borrower has credit limits totaling $10,000. If that borrower keeps his credit balances at approximately one-third of the credit limit, or $3,300, scores will improve.
By concentrating on the proper balance and timely payments, in about six months scores will magically begin to rise and the rest of the categories will fall in line.