Improve Your Chances of Getting a Bad Credit Mortgage: Understand Your Credit Report

By Gabriel Traverso
Mortgage Credit Problems Columnist

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Lenders across the country are now taking a closer look at home loan applications from borrowers with bad credit. Many of the options you might have had a few years ago, such as 100% financing, are now no longer available if you have a score lower than the six hundreds. Understanding your credit report can help you start taking the right steps to repair your credit.

Your Bad Credit Affects Getting a Home Loan

Lenders look at your credit report to learn about your payment history, any bankruptcies, and your debt-to-income ratio. Your credit report is a big piece of the puzzle lenders put together in order to decide whether to approve your mortgage application.
  • The ID Section: this part lists your personal information.
  • The Credit History Section: probably the most important part of your credit report. This lists all your accounts, whether open or closed, as well as your payment history. Lenders want to see that you made your payments on time.
  • Derogatory Accounts Section: have you had any accounts go to a collections agent? Were you late on your payments? Any charge-offs?
  • Courthouse Records Section: this is where bankruptcies would be listed.
  • Additional Information: this is where previous addresses and former employers are listed. Lenders look at this to see whether you have stayed in one place and held a steady job.
  • Inquiry Section: this tells lenders who pulled your credit report recently.
Sometimes credit reporting agencies make mistakes. Frequently, people find errors on their credit reports. This could be an account listed as open when it is actually closed, or an account in collections that you have resolved. Check your report for any inaccuracies and contact the credit bureau to have them resolved.

Clean Your Credit

If you want to get a home loan you will need to clean up your bad credit. Understand your report and start taking the steps necessary to get on track for a mortgage. It takes time and patience, so start now.

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