Why and How the VA Uses Your Private Data for VA Loans
In our last blog post I discussed why personal data protected by the Privacy Act is required in order to fill out VA home loan paperwork. The Department of Veterans Affairs and your lender require a Social Security number, an extensive list of credit history and residency information, plus details on bank accounts and credit cards. Since some Americans are sensitive (or unwilling) when it comes to handing out such information, it can be a learning experience when it’s time to claim VA home loan benefits.
The VA requires the same information used by the military to identify and track its members. That information includes Social Security numbers, dates of birth and other data, but why does the VA and your lender require all this? We covered several reasons in our first blog post, but there are a few important details that should also be understood.
When a VA loan applicant fills out the paperwork to start the process, one important item is an authorization form that lets the lender request credit reports on the borrower’s behalf. Without this authorization, the lender can’t begin the VA loan approval process. What’s more, VA regulations and other laws do not allow the borrower to furnish copies of their credit report to the lender–all relevant paperwork must originate from a credit reporting agency such as Equifax, TransUnion, or Experian.
Specifically, the VA official site states, “…these documents must always be delivered by the credit reporting agency or verifying party directly to the lender or its agent, and never to another party…and may not pass through the hands of any (third) party or the applicant.”
This would seem to be a safeguard against fraud–if the borrower furnished his or her own credit reports, there’s a chance that documentation could be altered before it gets to the lender. But the prohibition against third parties handling those credit reports is also a protection for the borrower. A VA loan applicant can rest assured their credit report goes in front of as few eyes as possible.
In many cases the lender may ask the borrower for something called a “blanket authorization” to request copies of a credit report from all three major reporting agencies. The multiple reports can protect the borrower–if one credit agency has an error on the buyer’s credit report, the lender can contrast the disputed entry on that report with the other two agencies to see if similar issues appear in their files.
A VA loan borrower may need to dispute erroneous information on a credit report, but the lender can cross-reference that data with the other reports for a better idea of what’s going on.
Ideally, the borrower would catch such discrepancies and dispute them long before applying for the VA mortgage, but some first time home buyers don’t think to start planning that far in advance.