Credit qualifying for VA loan

Credit qualifying for VA loan

After you submit an application for a loan or credit, lenders will get access to your credit information to find out about your credit history. Regrettably, this credit report stays with us for life so any mismanagement of credit when you were young may affect you many years after you have sorted out your finances. Reasons why your credit score may be bad contains mistakes or missing loan payments, checks bouncing, and late payments on your credit cards and other bills.

It may for that reason is helpful for you to get hold of a copy of your credit record so you know precisely what it says about you and you are made aware of any possible problems. This means that you can take steps to attempt and lessen the damage of your rating by making explanations, in particular if you have been bankrupt in the past. You may also want to close accounts that you don't use and broaden your credit card debts between a couple of accounts.

Debt

A declaration; the economic industry uses to describe any circumstances that you borrow money. Too much debt; is how the industry portrays circumstances where people borrow more money than they can repay. There are a lot of types of debt: credit card debt, department store debt, charge accounts, auto loans, student loans, mortgages, and money that you may owe the Internal Revenue Service. You may also borrow from parents, relatives, and friends, even if those debts may not be show in your credit report. Your capability to borrow more money or to have your credit extended is directly reflected by how much debt you carry. Mortgage lenders, for example, decide your purchasing ability by applying a debt-to-income ratio (a ratio that is calculated by totaling your monthly debt payments plus the proposed monthly debt payment divided by your gross monthly income, excessively high of a debt-to-income ratio reflects greater risk with the loan and may result in denial of the credit application. A good number mortgage lender will allow you to pay up to 42 percent of your gross monthly income in debt service. Of course this may vary depending upon the loan size, the type of loan, and the type of home you are purchasing.

Late Payments

Chronically late paying your bills, you've got a late payment problem. It can be a severe blemish on your credit report for lenders prefer to lend money to people who repay debt in a timely manner. How late is late? If you don't pay your Visa bill by the due date, you're late and it may show up on your credit report. If you fail to make a payment all together, a past due notice will be sent to you and you may be assessed a finance charge. If you're so late that you stop paying entirely on the account, it is likely that the matter will be turned over to a collection agency, that will be reported on your credit history as well as a late payment notice. How long does a late payment stay in your credit history? Typically, a late payment will appear for two years, though credit bureaus may keep them on your credit report for up to seven years. However if you missed only one payment in the last two years and you have been current on the account for the past 18 months and you have a reasonable explanation for the late payment, it is unlikely that a lender will deny you of credit solely on the basis of the late payment.

Bankruptcy

A tragedy may have occurred in one's life, such as the loss of a spouse or a job, or a person may have foolishly over extended their credit and is no longer able to keep up with their debt. The reasons are many and the consequences are severe. Once you've been declared bankrupt, a judge discharges your debts and, to a great degree, wipes your financial slate clean. Sounds easy and simple but it is not. Bankruptcy can be expensive and time-consuming and forever you will feel the stigma of it. Most negative information on your credit report is kept for up to seven years; a bankruptcy can stain your credit report for as long as 10 years.

Mistakes-Errors

Because of the volume of information that is being cataloged and entered daily into the credit databases, errors have been known to have happen. Many people have been turned down for credit because a $5,000 collection account appears on their report for a credit card that they never had. This is most commonly seen when two people share the same name (like a father and son) or have similar social security numbers. However, one good reason for checking up on your credit report is that someone else may be using your social security number or credit card numbers and playing havoc with your personal credit history.

Reposed

If you buy a car, furniture or appliances on an installment plan (where you pay a little bit of interest and principal each month), and you fail to make a payment or two, the company that sold you the item may require you to give back the merchandise until it is paid for. If you refuse to give it back, the company may come by and take it (repossess it). Repossessions are usually noted in your credit report.

Collections

If you don't pay a bill, you will probably receive a threatening letter from a collection agency hired by the creditor to collect the overdue amount. This is considered a collection account. If you receive such a letter, it should tip you off to a potential problem with your credit history. Not only will the creditor report to the bureaus that your account is delinquent, but collection agencies usually report to the bureaus of the collection account as well as their efforts to collect on past due bills. It is important to remember that if you pay off a debt from a collection agency that you make sure you have them send you a letter stating that the debt has been completely satisfied and no further action on their part or the creditor is necessary.

Credit Inquiries

One of the easiest credit issues to fix is having too much available credit. Even if you have never carried a balance on any credit card and if you have a lot of cards, creditors simply add up the balance as potential debt you could take on at any moment.

Absence Of Credit

Many young people, for example, often fall prey to not having a sufficient credit history built up and as a result are turned down for credit. Many lenders do not want to take the risk of extending debt when they don't know how well someone can pay back their obligation