Your credit score plays a crucial role in securing a VA mortgage, in both
the approval process and the terms, such as your interest rates and
fees.
A credit score of at least 600 is key, and the higher your score, the
better your chances. Improving your credit score can be done through
various strategies, like paying bills on tme, reducing balances, and
avoiding new debt.
Credit scores CAN be improved, and it’s really just a matter of using the
techniques below, there’s nothing “magical” about how your score is
calculated. It’s all very straightforward – you just need to know what the
credit bureaus are looking for, and give it to them.
However, knowing where to start can be tricky, depending on your
specific situation. Whether you're working to build your credit or
recovering from past mistakes, understanding the factors that shape
your score is essential.
Before you get started:
Get a FREE copy of your credit report from AnnualCreditReport.com
This is the ONLY website authorized by the federal government for free
annual credit reports, so avoid any imitators.
This is a legitimate website, so don’t worry when you are required to
input your Social Security number and Date of Birth to access your
credit report.
After you view your free credit report, you are ready to start working on
improving your scores.
Below are seven methods for boosting your score, the potential impact of each, and how long it typically takes to see results.
1) Make Timely Payments
Impact on credit: Payment history is the most significant factor in your
FICO® Score, accounting for 35%. This includes both positive and
negative payment records, which are reported by the major credit
bureaus: Experian, TransUnion, and Equifax. Consistently paying on
time can be the most effective way to enhance your score.
What you can do: Pay at least your minimum payments every month.
How long it takes: your score will start to go up every month, typically
in three to six months you will see a significant increase in your scores.
Just consistently make payments on all your accounts and avoid any
new credit.
2) Reduce Credit Card Balances
Impact on credit: The amount you owe constitutes 30% of your FICO®
Score, with your credit utilization ratio being a major factor. Ideally, try
to keep your balances below 30% of the credit limit. For example, if
your credit limit is $10,000, make sure your balance is $3000 or less.
What you can do: If you have large credit card balances, focus on
paying them down to below 30%, but do not pay them off. You want to
keep the accounts open, but with a small balance.
How long it takes: You should start seeing improvements within a 30 to
60 days, as credit card issuers typically report to the bureaus once a
month.
3) Keep Your Oldest Credit Accounts Open
Impact on credit: The length of your credit history accounts for 15% of
your FICO® Score. Your oldest account and the average age of all
accounts influence this factor. Closing old credit accounts can negatively
impact your score.
What you can do: Keep old cards open, even if you don’t use them
frequently. If needed, put a small recurring charge on them to keep
them active.
How long it takes: This factor develops over years, so closing an old
account or opening several new ones in a short time can hurt your score
very quickly.
4) Diversify Your Credit Portfolio
Impact on credit: A varied credit mix makes up 10% of your FICO®
Score. Having a combination of credit cards, installment loans, and
mortgages can improve your score, although it won’t significantly affect
loan eligibility.
What you can do: If you're just starting to build credit, consider a
secured credit card or a credit-builder loan. Be careful not to take on
unnecessary debt just for the sake of diversifying your credit.
How long it takes: Diversifying your credit takes time, and
improvements might not be seen until a few years after you’ve opened
new types of credit.
5) Don’t apply for New Credit
Impact on credit: Every time you apply for new credit, a hard inquiry is
made, which slightly lowers your score. Too many inquiries can
compound the effect.
What you can do: Avoid applying for credit unless absolutely necessary.
Look for lenders offering prequalification with a soft inquiry to check
your eligibility without impacting your score.
How long it takes: Hard inquiries remain on your credit report for two
years, but they only affect your FICO® Score for one year.
6) Challenge Errors on Your Credit Report
Impact on credit: Inaccurate information, such as fraudulent activity or
incorrect late payments, can harm your credit score.
What you can do: Check your credit reports for errors, especially if you
suspect identity theft. If you find discrepancies, dispute them with the
credit bureaus.
How long it takes: Disputes are usually resolved within 30 days, with
any valid changes reflected on your credit report shortly after.
7) Become an Authorized User
Impact on credit: Being added as an authorized user on someone else's
credit card, especially if they have good credit habits, can quickly
improve your score. This can raise your score 20 to 70 points, and the
effect is almost immediate!
What you can do: Ask a family member or close friend with a strong
credit history to add you to their credit card account.
How long it takes: The account's history will generally be reported to
the credit bureaus within a couple of months.