Even the smallest mistakes can lead to collections, like forgetting to return a Verizon Fios box or missing a medical bill. This hurts your credit score and makes it harder to get loans.

But getting advice about credit repair can feel like a confusing mess, even with countless online resources. 

While it might take a bit of research, the truth is most people can tackle credit repair on their own. That's where we come in—we want to help you navigate the steps you can take to repair your credit for your mortgage. 

And if you need more help, we've got you covered.

What Happens If I Have A Low Credit Score When I Apply For a Mortgage?

If you find yourself with a low credit score when applying for a mortgage, it can feel like you're trapped with limited options, and everywhere you look, the down payment and cash reserve requirements get higher and higher.

How can you possibly hope to afford a home with so few choices available? The good news is that you have more than you think you do.

The truth is, you can get an FHA loan with a credit score as low as 520. 

Now, your lender will need to underwrite the entire loan manually, and you should expect to have some pretty hefty requirements, such as 10% down, a healthy amount of cash reserves, and so on.

But it's possible. 

You just have to remember that lenders view your credit score as an indicator of your ability to repay the loan. However, everyone's financial situation is different, and there are many other mortgage products you may not be aware of that could work in your situation.

Here's a quick chart of different types of loans and their minimum credit requirements:

What Steps Can I Take to Repair My Credit Score For My Mortgage?

The good news is that there are steps you can take right now to help improve and repair your credit score. The sooner you start, the sooner your efforts will start to take effect. 

1. Check/Obtain Your Credit Report

First things first—you need to know what's on your credit report. After all, this is exactly what your lender is going to see, so it's a good idea to make sure that everything on there is correct.

Now, there are three main credit bureaus that keep track of your credit score (Experian, Equifax, and Transunion), and you can obtain reports from each of them individually or opt for another service that does it for you.

Pro Tip: Experian lets you access your report for free, and you can upgrade to its premium service to see all three scores simultaneously. Plus, they show you the FICO 2 score, which is what your lenders use.

2. Assess Your Credit Situation

Once you have your credit report in your hand, you're ready to start reviewing it. Every report looks slightly different, depending on who pulled it, but each one will be based on the same five principles: 

• Payment history
• Amount of debt (utilization)
• Credit age
• Credit mix
• New Credit

Each of these principles has different metrics that affect your overall score. Here's a sample of Experian's high-level overview section:

As you dive deeper into your credit report, you'll see it contains your:

• Personal and employer information
• All your open accounts (loans, credit cards, mortgages, etc.)
• Closed accounts
• Collections
• Public records (bankruptcies, etc.)
• Inquires (hard and soft)

You want to ensure that the information in each section is accurate. If something is out of place, we'll work on removing it in the next section. 

Pro Tip: Your loan officer or credit counselor will know the best strategies to make the most significant impact. However, you can keep a list of questions or concerns to discuss to ensure you address all your credit-related issues.

3. Dispute Any Errors You Find

If you discover any errors on your credit report (such as incorrect personal information, account details, inaccurate payments, or even fraudulent accounts), you need to have them removed.

To do this, you need to:

• Gather any evidence that supports your claim, such as account statements, payment receipts, or anything that proves the error.
• Contact the credit reporting agency (or agencies) and initiate the dispute.

Typically, you'll have to compose a strategically written letter that addresses specific items you want to be removed from your credit report. 

Once received, credit agencies are legally required to investigate the issue and respond within 30 days. They will attempt to contact the company or creditor that provided the incorrect information. 

If it can't be verified, they'll provide you with the results in writing and a corrected version of your report. 

Pro Tip: You can go through this process as many times as you need to have things removed, and you can even add supplementary evidence to back up your claim further. 

4. Establish a Positive Payment History

While you should be working on this before you even pull your credit report, it's essential that you're working to establish a positive payment history as it helps demonstrate your ability to manage debt responsibly.

Factors that contribute to a positive payment history include:

• On-time payments
• How long you've been making on-time payments
• Your payment consistency
• Different types of accounts you have (revolving credit, loans, etc.)

The best thing you can do is pay your bills on time and in full when possible. While you won't see improvements to your credit score overnight, if you keep paying on time, you'll gradually improve it. 

Pro Tip: If you're prone to forgetting when your payments are due, you can enroll in autopay, create reminders, and communicate with creditors. 

5. Lower Your Credit Utilization Rate

One of the key factors in determining your credit score is your credit utilization rate, which is the percentage of your available credit that you're currently using. 

Ideally, you want your utilization to be 30% or less on each account to show lenders you're not overly reliant on credit. Simply put, the lower the rate, the better the score.  

To lower your utilization rate, you'll want to:

• Try to reduce (more than the minimum) or pay off your credit card balances in full each month.
• Consider making multiple monthly payments if you can't pay off your balance in full.
• Be cautious about closing accounts, as this reduces your overall available credit. 

Pro Tip: Using a budgeting app or tracking your expenses can help you stay on top of your credit utilization rate and make it easier to manage your spending.

6. Limit Hard Inquiries on Your Credit

Hard inquiries occur when a lender or creditor pulls your score because you applied for a new loan, mortgage, or credit card. These inquiries temporarily lower your credit score because they signal you're looking for new credit.

When you apply for a mortgage, your lender will do a hard inquiry on your credit. But there are ways you can keep these types of inquiries from piling up, such as:

• Being selective about applying for new credit
• Space out your credit applications if you need to have multiple accounts
• Try pre-qualifications first, as they tend to be soft inquires

Pro Tip: When looking for a loan, like an auto loan or mortgage, comparing rates from different lenders is normal. If you do this within a short period (usually 14 to 45 days), it's treated as a single inquiry instead of multiple ones, so it won't hurt your score as much.

7. Seek Out Lenders Who are Willing to Work with You

If we're being completely honest, repairing your credit score can be a challenge—especially if you are new to understanding the ins and outs of credit repair. 

While you can definitely follow these steps to increase a low credit score, there are times when you might hit a roadblock that's tough to overcome on your own. That's where credit repair specialists come into play. 

They know all the rules, regulations, and language you need in your letters to impact your credit score significantly. 

And when you're on the hunt for a mortgage, finding a lender that's willing to work with you and your unique credit situation is essential. These lenders will know exactly which mortgage products are available for your needs. 

Pro Tip: While there are dozens of credit repair specialists out there, many lenders also possess a wealth of knowledge on credit repair strategies, and some of them can offer valuable assistance in this area.

Get the Best of Both Worlds With MDL

At Modern Day Lending, we understand the needs of today's borrowers and prospective homeowners, which is why we decided to launch our credit repair services—that way, we can help you with the entire mortgage process. 

Our goal is to help you get into the home of your dreams, and that starts by getting your credit in the best possible shape it can be. 

To do this, we actively engage with credit bureaus and creditors to get rid of negative items on your credit report. We have a deep understanding of consumer credit laws and bureau strategies, so we can handle anything they throw at us.

So, if you're looking for a comprehensive solution to repair your credit and find the best mortgage options tailored to your situation, look no further than Modern Day Lending. 

Our team of experts is ready to help you turn your homeownership dreams into reality. Get in touch with us and take the first step towards a brighter financial future.