One of the many benefits of the VA loan program is its flexible qualifying guidelines. Why? The goal of the VA Loan program is to make it easier for Veterans to become homeowners!
Therefore, the typical barriers to homeownership are dramatically reduced with a VA Loan. One of those barriers is the FICO credit score required to qualify. Thankfully, those who may not qualify for a conventional loan due to a low FICO score are more likely to be eligible for a VA Loan.
A FICO score is a type of credit score that makes up a substantial portion of the credit report. Lenders use it to assess an applicant’s credit risk and determine whether to extend a loan. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score. Typically, Hawaii VA Loans likes to see a FICO score of 620 or higher for easier pre-approval.
Update to Medical Debt on Credit Reports
A recent announcement that may help improve credit scores is a change to medical debt reporting on credit reports.
As of July 1, 2022, Equifax, Experian, and TransUnion have agreed to these three important changes to medical collection accounts:
- Paid medical collection debt will no longer be included on consumer credit reports.
- The time period before unpaid medical collection debt will appear on a consumer’s report will be increased from six months to one year. This gives more time to consumers to pay off debt before showing up on credit reports.
- Medical debt collection accounts under at least $500 will no longer be included on consumer credit reports.
Ways to Improve Your FICO Credit Score
These are good changes for anyone with medical debt seeking home loan pre-approval! If you want to qualify for a VA loan but fall short of the 620 FICO requirement, do not be dismayed. Contact us anytime! Our Hawaii VA Loans team provides credit analysis to improve your future FICO score. In the meantime, here are five ways to work on improving your credit score now:
- Pay down balances
- Dispute credit report inaccuracies
- Pay off credit card balances each month
- Create a budget
- Limit new lines of credit