The American dream typically looks like this: buy a house, live happily ever after. Okay, maybe there’s more to it than that, but home buying is a pretty big deal to most of us. It’s a pretty standard dream to one day have your own place. If you’ve spent any amount of time in the military, this dream might feel a little bigger. You’ve spent your entire career moving between homes and states and it would feel nice to just settle down and not have to worry about moving again. Fortunately, for service members, there’s a VA Home Loan, which helps more veterans qualify for home loans. Unfortunately, being a veteran doesn’t automatically qualify you for a VA Home Loan, especially if you don’t meet your lender’s qualifications first. That’s where the Veterans United Lighthouse Program can help.
The Lighthouse Program is actually a pretty easy concept. You want to buy your first home, you’re serving or served in the United States Military, but you don’t have a qualifying credit score. Or, you do have a qualifying credit score, but it’s low and you’d like to raise it, in hopes of getting a better interest rate on your home. Because lower interest means lower payments.
If this is you, the Lighthouse Program, offered through Veterans United will help you work toward raising your score. They do this by looking over your credit report and seeing where you have room for improvement. Then, they give you advice on how to make those improvements.
For example, let’s say that you have a low credit score and a derogatory mark saying that your credit usage is too high. To make this a little easier, you have three credit cards: A Visa, Master Card, and an American Express. Your visa has a credit limit of $10,000, your Master Card has a limit of $2,000, and finally, your American Express has a credit limit of $6,000. That’s a combined credit limit of $18,000. Of that $18,000, you’ve maxed out your Master Card, spent $4,000 on your American Express, and your Visa, you’ve spent $5,000 of that. That’s a combined $11,000 out of your total $18,000 that you’re limited too.
Now, you might be thinking, okay, so I still have another $7,000 I can use! I make my monthly payments on time for each card, so there shouldn’t be a problem. Well, this is where someone from the Lighthouse Program might tell you-you’re wrong. Instead, they might tell you to start paying your credit cards down, until you’ve only spent 20% of your limit, instead of over half.
Who Benefits from the Lighthouse Program
The example above is a pretty common one, and chances are you already knew that you aren’t supposed to max out your limit. However, that might also leave you thinking that you don’t need the Lighthouse Program because you could technically find all the answers on how to improve your credit on the Internet.
It is true, you could probably find all the answers you’re looking for a few clicks away from this article. But, with something like the Lighthouse Program, you’re getting a professional’s opinion, and you’re getting it for free, as a thank you for your military service. That’s a lot different than free advice from your uncle Bob, who’s still living in his mom’s basement.
Really, at the end of the day, only you can decide if you need the program. If you don’t know a lot about credit scores, you’ve claimed bankruptcy, you’re not good with your finances, or maybe you just can’t figure out how to boost your credit those last few extra points, then maybe this is the program for you.
Veterans United Lighthouse Program Reviews
The Lighthouse Program, unfortunately, has mixed reviews—however, remember it’s a free service—if you do a quick search on Google you’ll see some reviews that aren’t so appealing. However, the complaints are from a few years ago. Complaints such as, they won’t let me out of my contract just isn’t true; they offer the service both at no cost and no obligation. If they aren’t holding up their end of the deal, then you have no obligation to stay with this company as your lender. At least, that’s what they tell us.
Keep in mind, the representative with the Lighthouse Program is there to give you advice. There’s nothing to say you can’t seek free advice elsewhere. If you’re a veteran there are plenty of places that offer free financial advice. If you’re a USAA member, you should consider talking with them as well on how to improve your credit score. A lot of the complaints with Veterans United is that they give bad advice that actually makes credit scores drop. If this is your concern, do research outside of the advice you might get in the Lighthouse Program. This way you’re not relying on one source of information.
How the Lighthouse Program uses your FICO Credit Score
Now that you know what the Lighthouse Program is, you might be wondering, what are they are using to determine your credit score. The answer is your FICO credit score. Your credit score typically comes from three sources, Experian, Equifax, and TransUnion. In some cases, when you check your credit, you might only see one of those reports. However, your FICO credit score sees all three and combines them for an average. Meaning, if you have a credit score of 650, 675, 648, your FICO credit score would be the average of those: 657. So just think of your FICO score as your average.
About your FICO Scores
You might be asking, why are your FICO scores so important. Believe it or not, 90% of top lenders use your FICO Scores. This means it’s pretty important stuff. Your FICO may basically mean an average of all scores, which means it’s the more important of all your credit scores.
Good FICO Credit Scores
FICO credit scores range from 300 to 850. Unfortunately, in this range, there’s no way of saying what classifies a “good” FICO credit score. This is because every lender has their own set of rules, or requirements surrounding what gets you the loan you’re seeking. So, while one lender will accept a 580, someone else will require a 620.
Reasons for your FICO Scores
When your FICO scores come back, it will typically come back with five reasons or influences behind your score. Typically these reasons are negative because it is revealing what is bringing your score down. For instance, not having enough credit history is seen as negative and it will bring your score down.
The Minimum Required to Calculate a FICO Score
In order for you to have a credit report, you have to have credit. This typically means that you should have one account open for a minimum of six months. This account should also have been reported to the credit bureau in that timeframe.
Your FICO Scores Will Change Over Time
It is no secret your credit score will change over time. The question tends to be, how often does your credit score change? If you check your credit score today, maybe you have a 620, but check it 30 days from now, and you’re most likely going to see a new number. This new number could be better or worse, it just depends on what’s been reported over the past 30 days.
What’s not in your FICO Scores
While your FICO scores are the average, it does not mean it includes everything you would see on the other three individual reports. According to FICO’s website, the following things are not included in your credit score:
Race, religion, color, national origin, sex, marital status, age, where you live, salary, occupation, title, employer, date of employment, employment history, child/family support obligations, consumer-initiated inquiries, credit counseling participation, interest rates of credit accounts.
How to Improve your Credit Score with the Lighthouse Program
Once your FICO score is determined, you can start looking at improving your credit score, maybe it’s above that 620 mark, there are still a lot of different routes you can take in order to improve that score, and the Lighthouse Program can help you do that.
Remember, just because you reach a 620 and can apply for a VA loan, it doesn’t mean you want to stop there. Typically, the higher your credit score, the lower your interest rate will be. Some places offer discounts or fee exemptions if your credit score is high enough. Meaning, keeping working to improve your score even after you hit 620.
Check for Accuracy
The first step in reaching your 620 goal, or any credit goal is to check your credit report. Unfortunately, these reports aren’t perfect. More unfortunate, it’s not a rare thing to see derogatory stuff on your credit that isn’t true. Sites like Credit Karma, let you check your score for free without hurting your credit and then lets you dispute anything you don’t agree with. It’s actually a really easy process compared to what you might think. This is one of those things I know from personal experience, and I expected it to be a huge hassle, and it really wasn’t. The Veterans United Lighthouse Program can not only help you read your credit report, but they can help you understand it, and keep you on track to make improvements.
Once you’ve made all your disputes and corrections have been made, you’ll be left looking at your real credit report, and you’ll be able to accurately determine what you need to work on. For instance, do you have a lot of late payments, paying those off will help your score.
Fixing your late payments is a pretty big deal. When you’re late on a payment, this will get reported to collections. Once that happens, you’ll start to see your credit score drop, which isn’t something you want. So start making those payments, and as they fall off your report, you’ll start to see improvement.
Unfortunately, the Lighthouse Program can’t increase the age of your credit, but know that it is a determining factor in your credit score. The older your credit, the better it is for your credit score. If your credit is under 10 years, it’s not a bad thing, but it’s also not helping your credit. This is a reason why you shouldn’t just keep opening credit card accounts every year, it lowers your credit history’s average, which can lower or keep your credit score from rising. Unfortunately, this isn’t something you can just go and fix, you have to wait it out. If you open a credit card today, you can’t just wave a wand and make it 10 years old. You have to wait until it matures a little before it makes your credit look good.
Along these same lines, limiting your credit application is a good idea too. Of course, every time you open a new account it affects your credit age, but it also puts a ding in your credit score. Every time you have a hard inquiry, your credit score will drop. This is why companies like Credit Karma can show you your credit score anytime you want without hurting your score, because it’s not a hard inquiry. But, let’s say you want to go out and buy a new car. Unless you’re paying cash, you’re going to have a hard inquiry on your credit score. The more often you have credit checks like this, the more your credit score will drop. So, if you’re trying to raise your score to buy a home next year, you probably don’t want to go out and buy a new car or open a new credit card account.
This leads to the next topic of credit utilization. You might have grown up your entire life being told, don’t get a credit card. Unfortunately, you can’t build credit without going into a little debt. For example, the first major purchase a person makes is typically a car. You need to buy a car, but you can’t buy a car without credit, and you can’t get credit until you buy the car. Paying in cash isn’t smart either, because that doesn’t build credit. And unless you’re going to buy a house in cash, not building credit is a bad idea. So, sometimes the best option is to open a credit card first. The key, however, is to keep it paid off and never utilize 100% of your limit. This looks bad, even if you’re paying it off. Eventually, you’ll have a credit score, but it might not be very high. You can finally buy that car you wanted, but it might be at an 18% interest rate, but at least you’ll have the car. Unfortunately, you’ll also start putting yourself into debt—and who said being an adult wasn’t fun?
However, despite the debt, creditors like seeing you can pay stuff off, and that happens by putting yourself into debt. But, do this by having no more than 10-29% of your credit limit used up. If you have a credit card with a $1000 limit, never used more than $300 on it. At least, that’s a general idea. Of course, we don’t expect that you’ll never spend more than $300, but just try and keep it paid off so it’s not over that amount. Most credit lenders recommend, that you don’t use up more than 30% of your credit limit. However, the ideal limit is 10%. So, if you must use your credit cards, 20% is a good cushiony area to be in.
Depending on your personal circumstance, the Lighthouse Program can guide you in the direction that’s right for you. They can let you know if it would be wise to open a new account, or to hold off on that a little longer. They can let you know where you stand on your credit utilization, and help you set goals in getting yourself to that ideal percentage.
Other ways of Improving your Credit Score with the Lighthouse Program
- Don’t Let Old Mistakes Unfairly Haunt You: The Lighthouse Program experts can look for this
- Get a Credit Card: The Lighthouse Program experts will advise if this is the right step for you
- Open a Secured Credit Card: The Lighthouse Program experts will advise if this is the right step for you
- Limit Credit Applications: The Lighthouse Program experts can let you know what makes a hard inquiry
- Fix Your Credit Utilization Ratio: The Lighthouse Program experts can let you know where you stand
How long to improve your credit with the Lighthouse Program
Raising your credit score doesn’t happen overnight, even with the Lighthouse Program. And while it may seem like your credit score drops overnight, that doesn’t happen either, well it does, but not overnight after opening a new credit card account or getting a loan, or not paying a bill. It takes time for these things to reach your account, but when they do, you’ll notice. Things like paying off your car will cause your credit score to drop, but it won’t happen the day after you pay off the loan. The same happens when you start building credit. Just because your credit card account matured to the recommended age today, does not mean you’ll check your score and it will be improved tomorrow. It can be frustrating, we know, especially if you’re right on the cusp of good or excellent credit or that 620 mark most lenders require for a VA Home Loan.
At the end of the day, whether you’re looking to improve your credit score through the Lighthouse Program, or you’re doing it on your own, these things take time. Be patient, it will move, just not within 24 hours.