a. Credit Report Standards (continued)

VA may decline to accept a credit report which does not meet these standards.

VA will notify the lender and the credit reporting agency of how quality standards are not being met.  If the problem continues, VA will inform all participating lenders that credit reports from the particular credit reporting agency are unacceptable.

b. Verification and Rating of Debts and Obligations

See section 5 of this chapter for requirements of verification.

c. How to Analyze Credit

The applicant’s past repayment practices on obligations are the best indicator of his or her willingness to repay future obligations.  Emphasis should be on the applicant’s overall payment patterns rather than isolated occurrences of unsatisfactory repayment.  Determine whether the applicant (and spouse, if applicable) is a satisfactory credit risk based on a careful analysis of the credit report and other credit data.

Rent and Mortgage Payment History

The applicant’s rental history and any outstanding, assumed, or recently retired mortgages must be verified and rated.

Housing expense payment history is often the best indicator of how motivated the applicant is to make timely mortgage payments in the future.

Absence of Credit History

For applicants with no established credit history, base the determination on the applicant’s payment record on utilities, rent, automobile insurance, or other expenses that applicant has paid.