Mortgage Refinance Guide

When you apply for a new mortgage loan the lender will use your FICO credit score to evaluate the risk of lending you money. The lower your FICO credit score, the greater a risk you are to mortgage lenders. Here are the basics of how your credit score affects your mortgage application and how you can improve your application when you have a poor credit rating.

Your credit score is calculated from your credit history. There are a number of factors in your credit history that determine the numerical value of your FICO score. These factors include the total and available amount of credit you have, your payment history, any late payments you have, and any negative information such as collections, write-offs, or bankruptcies on your record. This negative information on your credit history has a strong influence on your credit score.

Improve Your Credit Score

There is no quick fix for a poor credit rating. Repairing your credit score will take time, money, and patience. You can improve you credit score by paying all of your bills on time, maintaining low balances on your credit cards, and using credit responsibly. If you have negative information in your credit history it is important to settle with the creditor that placed it there and have it removed.

Qualify For a Mortgage with Poor Credit

If you have a poor credit rating and do not have the time necessary to improve your credit, you can still apply for a mortgage loan. Depending on the severity of your credit problems you may have to seek financing from a specialty mortgage lender that deals with bad credit loans. These lenders are often referred to as “sub-prime” mortgage lenders. You can learn more about your mortgage options including common mistakes many homeowners make by registering for our free mortgage guidebook: “Mortgage Refinance: What You Need to Know.”