Understand Your Credit Report Before Applying For a Home Loan

By Gabriel Traverso
Mortgage Credit Problems Columnist

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Applying for a new home loan can be worrisome, and daunting. If you have bad credit, applying for a new mortgage doesn't have to be stressful. Start easing your mind by getting a better understanding of your credit report and what potential lenders will consider for a bad credit mortgage.

Applying for a home loan requires submitting a credit application to a lender or mortgage broker. This means that they will be running your credit report to determine whether you qualify for a loan program and at what terms. Lenders will be reviewing your report to determine your payment history to include your total debt, late payments, bankruptcies, collection accounts, etc. If you have bad credit, it is highly likely that you have some or all of these on your report. Gaining a solid understanding of your credit report can help you understand what you can do to make sure you qualify for your bad credit home loan.
  • The ID Section: this lists your identifying info to include name, SSN, and date of birth.
  • Credit History Section: this is the most important part of the credit report. It tells potential lenders about your current and past accounts. This section will include company names, account numbers, balances, activity, terms, and more. Lenders will be looking at credit limits, balances, past due amounts, and whether accounts are open or closed.
  • Collection Accounts Section: tells lenders what accounts you have in collections.
  • Courthouse Records Section: refers to public records of your financial records such as bankruptcy, liens or judgments.
  • Additional Information: usually lists former addresses and past employers.
  • Inquiry Section: tells potential lenders who has looked at your credit report in the past 24 hours.
By carefully reviewing your credit report prior to applying for a bad credit mortgage, you won’t be confronted with last minute surprises. You may find that there are mistakes on your report that can make a big difference on whether you qualify for your bad credit home loan.

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