How to Fix your Credit Score and Qualify for a Home Loan

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One might be wondering why some lenders turn down a mortgage application while some others might consider it fit for approval. The answer may well lie in the credit report and the credit score to be precise which plays a crucial role in loan sanctioning.

Credit history is an important factor affecting loan granting decisions by the lender or mortgagee. As part of the pre-approval process a detailed investigation is carried out into your financial history whereby the lender assesses your finances, your credit history and your investments. Your debt ratios are compared with the lender’s standard while deciding on the loan approval. Your level of debt or credit history is taken as a parameter for judging your ability to make the monthly repayments.


The credit history as represented by your credit report plays a very crucial role since some lending institutions may even turn you down because of incompatibility with their lending standards. Too much debt and poor credit rating is a common reason cited for turning down a mortgage application.

At times your application may not be rejected altogether but you may have to settle for a loan amount lower than what you desired or expected. The other terms and conditions of the loan might also not have proved worthwhile for you. All these could have been avoided had you been a little more careful and vigilant while placing your documents about your personal finances as reflected by records of your earnings, monthly expenses and debts. Among these documents the credit report is of prime importance which reveals your credit score.

While considering your application the lender will also get to analyze your credit report. This provides all details about your financial history, payment records, total debts and bankruptcies (if any). This information is used to work out your credit score or FICO score (a rating of Fair Isaac and Company). This is a composite number-a numerical rating of your credit worthiness. These scores may range from 300-900. However, most people’s score fall between 600 and 700. Higher credit scores make you more appealing to the lender. Thus, you will be more likely to be offered better rates and loan terms.

A number of factors can affect the credit score. They can be broadly classified as:

a) The length of time you have had credit, outstanding credit, methods to repay this and how close you are to your credit limits.

b) Problems with credit which you may be having like late payments and bankruptcies. The number and frequencies of your delinquencies is to be considered.


It may be noted that almost 80% of credit reports contain errors. Getting for yourself a copy of the report beforehand will enable you to take steps for improving your score.You will be availed of the opportunity to review the report and rectify the score to quite an extent.

Some steps which can be taken in this regard are:

a) Finding out credit cards which are not needed anymore and closing the corresponding credit accounts.

b) Settling outstanding accounts, if any.

c) Paying out your bills, debt payments on time and in full and reduce your outstanding credit.

d) Verifying all listed account numbers and getting assured that they are yours.

It may be noted that minor credit problems or problems cropping up due to illnesses or temporary loss of income due to some unpredictable occurrence will restrict your chances of getting the aspired loan only from some high-cost lenders. Other lenders will hopefully be considerate enough to overlook such minor problems.

In spite of the best efforts there may still be certain negative indications in the report which could not be done away with. In such case you need to explain the situation to the lender. If at all it cannot be explained then, perhaps, you have to make greater down payments.


Getting to know how credit record affects loan prospects, proceed towards making improvements in your credit report. Your loan prospects will improve, no doubt. It will take you a long way towards securing your desired mortgage loan.

By Lance Williams
Lance is an accomplished writer with specific expertise in the Mortgage and Real Estate field and has been involved for quite some years with MortgageFit LLC as a content developer.

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[TaiShan]

I found also that having a credit checking service like credentials or discovers credit check service is a great way to keep track of your credit report for anything that may be hurting your credit or if someone has hijacked your info and ruining your credit. You could have something that has lingered on your account that could be removed, but both the reporting bureau and the company/agency that reported it in the first place don't care to be proactive to remove the negative information. If you write a few letters you can actually have negative information removed from time to time. So it is a good idea to be involved with your credit report too.
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Politically speaking I am a little ant in the ant pile paying my taxes and doing my job.

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[Wodehouse]

I have been rebulding my credit by making sure that I am never late on anything to anyone. I also went through a bankruptcy and found that I could use payday loans for the rare emergency cash that I might need. I don't like to borrow from payday places, but its better for me than getting a late fee and mark on my credit report from my utility company. Again, I rarely need it, but sometimes my paycheck doesn't come up before my bills are due. I went through http://www.nationalpayday.com. At least they seem pleasant enough.

[Fringe]

I like pleasant spammers.

We are almost through with all our credit debt. We have a couple more to go and then we are promising never to get back to that lifestyle. In the next couple of weeks we will have NO credit debt! It's like a dream! So I've been trying to learn how to keep a good credit rating. Everyone is saying 1st, keep the cards open, don't close accounts. 2nd, use them occasionally but pay them off before they are due. That second part sounds like too much responsibility, but I guess that's the point huh?