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VA Streamine: Save Military Personnel Possibly Hundreds Monthly-Rock Bottom Interest Rates

Friday, June 10th, 2011

Many Americans are trying to save money anyway they can. Cutting costs by stretching their dollar on food, clothing and medicine helps. But, being able to reduce large expenses on a monthly basis, would be the most help. A lot of people have refinanced their homes. Now, with the VA interest rates hitting close to or being at rock bottom, active or inactive servicemen and women who currently have a VA loan, can save big money every month. They can refinance their existing VA loans under the VA Streamline Refinance Program.

A 620 Fico score or home appraisal no longer needed

If you have already tried to refinance under this loan program and failed, it would most likely benefit you to try to refinance again. As of April 18, 2011, the rules have changed for refinancing with the VA Streamline Refinance Program. Previous failed attempts might not be a problem for you now.

A Fico score of 620 or an appraisal is no longer needed. Also, this loan addresses the difficulties with your current VA loan being more than what your home is worth.

Some VA interest rates are as low as 2.75 percent with an APR of 2.45 percent. These rates are historically at low amounts. In many cases, hundreds of dollars can be saved each month on your mortgage payment.

Quick and easy loan approval

The VA Streamline Refinance Program is designed for active and inactive military personnel to take advantage of the very low interest rates. It was set up to make it easy and quick. Also, there are some places that will pre-approve you in just 60 seconds.

Other qualifying features that this loan has are:

Your existing VA loan has to be up to date on its monthly payments. You can not be behind.

There cannot be more than one-30-day late mortgage payment made on your existing VA loan within the last 12 months.

Employment and income verification will probably be needed.

A refund of your existing escrow account can be made to you.

You cannot receive any cash back funds from the refinance.

After the loan is approved, you can skip up to two monthly payments.

American military personnel and their families can widely benefit from the VA Streamline refinance of their existing VA loan, especially since the VA interest rates are very low. It will just save a lot of money each month for them. They can use the financial boost to help get caught up on other important bills. Families can stop skimping on their food, clothing and medicine expenses. Reducing monthly mortgage expenses will ease the money crunch that seems to be never ending.

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Posted in Home Values, VA Credit Score Info, VA Loan, VA Refinance, VA Streamline Refinance, va interest rates | No Comments »

VA Streamlines Do Not Require An Appraisal Of Home Value

Friday, April 22nd, 2011

Effective April 18, 2011!!!!

With interest rates still very low, many home owners are refinancing their mortgages to get lower finance rates. They face a tons of paperwork and documentation. The process can last a while, need a new appraisal and generally be a pain in the neck. Of special concern is the appraisal as so many home owner’s properties have seen values reduced to a number lower than their mortgage. A 1% reduction can save you $100 to $600 per month with no out-of-pocket expenses.

Fortunately, under the VA Streamline Program, Veteran’s Administration mortgage borrowers can refinance their property without an appraisal. Countless number of veterans and active duty military members are fortunate to take part in the United States Department of Veteran’s Affairs Streamlines Mortgage Financing program. The program is sometimes called IRRRL, an acronym for Interest Rate Reduction Refinancing Loan.

The VA Streamlines is truly an express loan:

No appraisal needed
No income or employment verification required
No credit report required
There is no need for a termite inspection
Loans close quickly

However, though the Veteran’s Administration backs the loan and doesn’t require any of the above items, you must shop for lenders as some require appraisals and credit reports.

Your existing Veteran’s Administration loan must be paid on time for the past 12 months and current when you apply for refinancing. Additionally, you may only refinance an existing Veteran’s Administration loan with this program.

Veteran’s cannot refinance for a higher amount that the refinanced mortgage, in other words no cash back to the borrower. The exception to this is the borrower may add up to $6,000 for energy efficiency improvements and add any loan origination costs too. Be careful though, as this will raise your monthly payment than a straight refinancing. In addition, some lenders may want you to look at a 15 year term for the Streamline as it will save you tens of thousands of dollars in interest. But, the monthly payment will be much higher as you are repaying much more principle than if you write a thirty year repayment plan refinancing. Make sure you can afford the payments as your home is at stake.

The occupancy requirement for a Veteran’s Administration Streamline is different from your original Veteran’s Administration mortgage loan. For the original loan you had to certify that you would be occupying the home, for an IRRR loan you are only required to certify that at one time you lived at the property.

An additional feature of Veteran’ Affair Streamline refinancing is that you may up to skip two payments over the life of the loan – they are put at the back-end of your loan.

There is no better refinancing program available than the VA Streamlines program. With little paperwork, no out of cost expenses as you can roll closing costs into the loan and the potential to significantly cut your monthly mortgage payment this is loan that you should explore at once. It could save you a bundle of money.

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Posted in Home Values, VA Credit Score Info, VA Refinance, VA Streamline Refinance, underwriting, va interest rates | No Comments »

Veteran and Military Credit Blog

Thursday, August 12th, 2010

Checking for errors:

Creditors aren’t perfect, either

Other people make mistakes too. Even banks and credit – card payment processors. Considering that about 4.5 billion pieces of data are added to credit reports every month, it shouldn’t be a big surprise that incorrect information may show up on your credit report. And won’t even get into the unrelated problem of errors caused as a result of identity theft. There have been a number of conflicting studies on what percentage of reports contain errors and of those, how many were serious enough to affect either the terms under which credit was granted or if it was granted at all. So, you may have errors on your report or not. And they may be serious or not. But unless you are feeling really lucky, I strongly suggest you find out what’s in your report.

Still, credit –reporting agencies have a vested interest in the accuracy of the information they report. Remember: They sell it, and their reputations are on the line if their information is consistently inaccurate, If credit – reporting agencies consistently provide error – riddled data, those who grant credit won’t be as eager to pay money to get or use a bureau’s credit reports.

Getting a copy of your credit report gives you a chance to check for these errors and – better yet – get them corrected! You can have inaccurate information removed by one of two methods: contacting the credit bureau or contacting the creditor.

Contacting the credit bureau

If you notice incorrect information on your credit report, contact the credit bureau that reported the inaccurate information. VA Credit Solutions can assist you with Free Credit Repair too.  Each of the three major bureaus allows you to dispute information in your credit report on its Website, or you can call the bureau’s toll free number. If you make your dispute online, you’ll need to have a copy of your credit report available; there is information on the report that will allow the bureau to confirm your identity without a signature. If you opt to call the toll free number, you’re unlikely to get a live person on the other end – this stuff is heavily automated – but you’ll be told what information and documentation you need in order to submit a written request. After you properly notify the credit bureau, you can count on action.

Credit – reporting agencies are required by the Fair Credit Reporting Act to investigate any disputed listings. The credit bureau must verify the item in question with the creditor at no cost to you, the consumer. The law requires that the creditor respond and verify the entry within 30 days, or the information must be removed from your credit report, and the credit reporting agency has to notify you of the outcome. If information in the report has been changed or deleted, you also get a free copy of the revised report.

Contacting the creditor

Another way to remove inaccurate information from your credit report is out – lined under the Fair and Accurate Credit Transactions Act, passed in 2003 and rolled out in pieces through 2005. Under these new FACTA provisions, you can deal directly with the creditor who reported the negative information in the first place. Contact information is contained on your last billing statement from the creditor.

I strongly suggest you do everything in writing, return –receipt requested. After you dispute the information, the reporting creditor must look into the matter and cannot continue to report the negative information while it’s investigating your dispute.

For new delinquencies, FACTA now requires that you be notified if the negative information is reported to a credit bureau. That said, you may have to look closely to even see this new notice. Anyone who extends credit to you must send you a one-time notice either before or no later than 30 days after negative information – including late payments, missed payments, partial payments, or any other form of default- is furnished to a credit bureau. The notice may look something like this:

· Before negative information is reported: “We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report.”

· After negative information is reported: “We have told a credit bureau about a late payment, missed payment, or other default on your account. This information may be reflected in your credit report.”

The notice is not a substitute for your own close monitoring of your credit reports, bank accounts, and credit-card statements.

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VA Streamlines and Bankruptcies

Friday, July 16th, 2010

Does a BK have any effect on a VA streamline refinance? This is a question that gets asked by Veterans almost every day. The simple answer is YES! The requirements or guidelines are much different than if you were trying to purchase a home. I might add that it also depends on if the Bankruptcy was a chapter 7 or  chapter 13.

The difference between a BK 7 and 13 is this – Chapter 7 involves a complete liquidation of debts listed in the bankruptcy whereas the Chapter 13 involves debt restructuring by paying a trustee every month who in turns pays the debts listed on the bankruptcy.

Here is what the VA says on a streamline refinance bankruptcy – “Although no underwriting is required, approval of new credit may be required by the trustee in a chapter 13 BK” This is always the case. If a Veteran is paying on a chapter 13 BK they must get special permission from the courts and trustee to refinance their VA loan. Things are different for a Chapter 7. Most lenders will do a streamline refinance just as long as the Chapter 7 bankruptcy is discharged.

Remember though that the rules of late payments and minimum credit scores are still applicable. A Veteran cannot have any 30 day late payments on the mortgage within the last 12 months and must have a credit score of at least 620. If a Chapter 7 has just been discharged chances are the credit score is not going to be 620 and thus making them ineligible for the streamline refinance. Please understand that the credit score requirement IS NOT VA! This is a lender overlay.

If this information has been helpful or you have additional questions please contact me at 1-888-657-2848 ext 222.

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Uncovering the Details in your Credit Report

Tuesday, June 8th, 2010

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.

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How veterans and military families can get a copy of their credit report

Monday, May 10th, 2010

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 advisers 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 report. 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.

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Military Families and Veterans are you Aware of the History of the FICO Score?

Wednesday, April 28th, 2010

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 t o 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 effect 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 admission to know what their scores are.

Now days, 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 know 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 now days.

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How Military Families can Improve Their Credit Scores for Better VA Loan Rates

Tuesday, April 20th, 2010

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!

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Leave no Man Behind

Monday, April 12th, 2010

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 truest 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 distills 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 any time 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 payoff 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 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.

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How Credit Cards Affect a Veterans Credit Score

Thursday, April 8th, 2010

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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