My Credit is Awful - Can I Get a Mortgage and Buy a Home?

Reader Question: My credit is awful. Can I get a mortgage loan to buy a home?

To be perfectly honest, it's unlikely. Somebody asked a similar question back in October, but used the word "horrible" instead of awful credit. It's the same scenario ... different adjectives. The previous Q&A hyperlinked above offers a bit of background into the credit and housing crisis we are experiencing right now, so it's worth a read.

Instead of explaining the reasons why you can't buy a home with an awful credit score, let me offer some tips on what you can do to raise your credit score as quickly as possible. We also posted a new video to the real estate videos section of the website that addresses this subject. Look for the video with the title "How to Raise Your Credit Score."

The first thing you should do is figure out why your credit is awful in the first place. There's no point in moving on to any other step in this process until you do that. So you must find the source of the "bleeding" before you can apply bandages. If you know fully well why your credit score is awful then you can move on to the next steps. But if you don't know the cause, get a copy of your credit report and read through it for possible causes.

Once you've determined the causes of your credit problems, you need to find a way to correct them. In addition to that, follow a three-pronged plan of attack for raising your score:

1. Correct any errors you find on your credit report.
2. Pay all of your bills on time to avoid having more negative info reported.
3. Reduce your credit card balances. You can keep the accounts open -- just pay down the balances to reduce your credit utilization ratio.

The next logical question you might ask is: "How long will it take me to improve my credit?" Well, this depends on two things -- just how awful your score really is, and how proactive you are about taking the steps outlined above. Here's another article that addresses the time frame question: How long does it take to improve a credit score significantly?

Hope that helps you out some. Good luck.