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Getting a Home Loan: The Biggest Myths About Your Bad Credit

By Gabriel Traverso
Mortgage Credit Problems Columnist


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If you are ready to buy a new home but are still weighed down by past mistakes you might think your bad credit will prevent you from getting the home of your dreams. Before you move forward, let's dispel the myths about what you should do if you have bad credit.

Bad Credit Myths

  • You should close your credit card accounts before applying for your home loan
  • Your credit score will suffer as a result of checking your report
  • You have to pay fees to fix errors on your credit report
  • Once paid, bad debt disappears from your credit report
  • Your credit score won't improve for seven years
  • One late payment won't hurt your credit score

Bad Credit Truths

Open credit card accounts can help your bad credit as long as you're in good standing and aren't maxed out.

Checking your credit report does not hurt your score. You can shop for a home loan and have your report checked several times without bringing it down.

No one has to pay fees to fix errors on their credit report. All you have to do is contact the credit bureau to file a dispute. These days you can even do it online.

Bad debt will stay on your report for seven years, even when they're paid off. However, you are given space on your report to provide an explanation.

Once you have a problem yes, your credit suffers. However, you can make incremental improvements to bring your bad credit score back up in a relatively short time.

Late payments bring your credit down. Lenders will want to see that you are in good standing with all of your accounts and may ask for an explanation if they see late payments in your past.

Don't Be Discouraged

The fact of the matter is that yes, your bad credit will affect your getting a mortgage. In a bad credit mortgage you will most likely end up with a higher rate. However, that doesn't mean you have to be misled by the wrong idea about your credit score.

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