When applying for a mortgage, one very important factor that determines if the mortgage application will be accepted by a lender is the credit rating of a person. Sometimes, when a mortgage application is rejected it is due to the fact that the person had bad records in his or her credit history that affected his or her credit rating negatively.
A person with a bad credit is usually denied mortgage approval because the assurance of repayment is usually very low. For instance, would you want to lend a person money when the person doesn’t have any job to do and does not have any form of income to payback? I bet your answer would be “NO”.
So, a mortgage loan may not be approved for the sole reason of a bad credit. But one question asked by a person with bad credit could be “can I get a mortgage with bad credit?” The answer to that is “YES” because some lenders render a bad credit mortgage which is also called sub-prime mortgage. But this is not advisable to be done and is not acceptable by most lenders or mortgage agencies because both parties tend to have very high risks at stake. That is, the lender is not assured of repayment and the borrower also is charged with very high interest rate if the lender is to give a person with bad credit ratings a mortgage.
In getting the best mortgage deal, it is very necessary to have a very good credit rating. But however, if you have a bad credit rating, there are steps to be taken to improve your credit rating so that you can get approval when applying for a mortgage. Some of these steps are listed below;
1. Check your files annually or before any major application
2. Avoid continuous rejections: Every application for credit leaves a ‘footprint’ search on your credit report and it is immediately shown or visible to other lenders. So it is advisable to know that before you apply for anything, you make sure that all your documents relating to your credit ratings are improved before you apply for a loan or credit or mortgage. Note that you only get things worse if you continue to apply when you have an un-improved credit rating.
3. Use a credit card rebuild card to build a history and restore past issues
4. Don’t be late on credit repayments: Since you are trying to improve your credit ratings and your credit ratings is dependent on past credit history, you are to make sure that you are never late anymore to make credit repayments as it will help improve your credit ratings among many lenders.
5. Cancel unused credit cards: If you have too much available credit, if they are unused, it may be a problem in improving your credit rating. So it is best to cancel some of them. But also note that if there are one or two accounts that have good credit histories, it is of benefit to you not to cancel such accounts as it may improve your credit ratings with some lenders.
They are several many other steps used to improve credit ratings but the ones listed above are the basic ones that must be done to effectively improve any credit ratings or credit score.