Can I Get a Mortgage with Bad Credit?

A frustrated homebuyer-to-be asks:

Q: My credit score is not good. Most of it is because I have two accounts that are the same on my credit report, and two that are paid off but still on my credit report. How can I get someone to help me finance a home? I pay bills on time but at that time in my life I had a sick fiancée to care for.

A: Negative information does not haunt you forever. Under the federal Fair Credit Reporting Act, late payments can be reported for seven years and collection accounts may be reported for up to seven and a half years, whether they are paid or unpaid, Bankruptcies can remain for ten. But the good news is, the older that information becomes, the less important it is to your credit. Accounts in the past two years typically carry the most weight.

I don’t know how recent your problems were, but I suspect part of the trouble you are having is that you don’t have current positive references on your file. I would recommend you check your credit reports and scores.

With your three bureau credit reports and scores in hand, you can use FreeRateSearch.com to find out what home loans may be available. After you complete your initial mortgage rate search, you can also try “what if” scenarios by changing the information you submit — what if you increase your income, for example, or reduce your proposed loan amount? This may help you find a loan that works for you.

Most mortgage lenders like to see at least four current credit references paid on time. If not, you may need to start with a secured credit card.

I would also recommend you dispute the account that is being reported twice. If there is a duplicate account for the same item, one should be removed.

If you really focus on your credit, and make sure your other qualifications are strong (down payment, steady income, etc.) you should be on your way to becoming a homeowner.