The VLB and its participating mortgage lenders require loan applicants to meet certain credit requirements, one of them being a minimum FICO (credit score) of 620. If you plan to apply for a VLB home, home improvement or land loan, make sure you know your credit score. If it’s below 620, steps you take now will, over time, improve your score.
First, order a free credit report from each of the credit bureaus (TransUnion, Equifax and Experian) once a year at www.annualcreditreport.com. Check for damaging errors, and then write a letter to the bureau to dispute any incorrect items.
Second, it is important to keep your payments current. Your payment history accounts for 35 percent of your total FICO score. If you have credit cards or other revolving debt, keep your balances to less than 30 percent of your credit limit on each account. Also, it’s better to spread your debt to several accounts rather than to favor one card.
Another way to improve your credit is to have your credit limit increased without using that additional credit. But remember, don’t apply for new credit during the months leading up to an application for a VLB loan as that will decrease your score, and closing credit accounts will impair your score. After three to six months of taking these steps, your credit score should improve, and you may be able to qualify for a VLB loan.