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Man approved for a loan

Being turned down by a mortgage lender can be a huge disappointment. But before you give up hope, let’s take a look at your options for improving your credit and reapplying.

Since the financial crisis, mortgage requirements have tightened up in order to keep the housing market from bottoming out. This means that your credit history is under more scrutiny than it would’ve been prior to 2008.

With a few financially savvy steps, you can be on your way to getting approved. Let’s dive into some options to get you in a house as soon as possible.

Identify Why You Were Denied and Take Action

The first step is to return to the source. If anyone knows why you’ve been denied a mortgage, it’s going to be your lender. And according to the Equal Credit Opportunity Act, lenders are required to tell you why you’ve been turned down for credit reasons. They must include a letter with the specific details, as well as the name of the credit reporting agency that supplied that information. If you feel that this letter is too vague, don’t hesitate to have a conversation with your Home Loan Expert. Feel free to call or shoot them an email. Lenders want your business, so they’ll be happy to help you dig up the root of your credit issues.

New to Credit

Before we get into the idea of rebuilding credit, what if there’s nothing to rebuild at all? This might be the case if you have no credit. It’s important to get your credit history started before applying for a mortgage so that your lender has some idea of how you manage credit and debt.

Secured Credit Cards

A common way to get started is with a credit card secured by your own funds. If you put down $1,000, for example, your credit limit would be $1,000. After you’ve had this for a while and built your score up with on-time payments, you can move to a traditional credit card.

Another good way to build up your credit if you’re new to this game is to piggyback on someone else’s good credit. For example, parents might add their child as an authorized user in order to let their child reap the benefits of good credit, with the parents still being responsible for the bill.

Credit-Builder Loans

Another way to build credit would be to take out a credit-builder loan. These go by different names, but they’re personal loans that are secured by the borrower’s personal funds. They’re repaid in installments. Local banks and credit unions may work with you on these.

Other types of credit builder loans functions similarly to the secured credit card. Instead of getting all the personal loan funds at once, you’re given an account to use as a line of credit that you make monthly payments toward.

How to Rebuild Credit

If you aren’t new to credit, you might have a credit score lower than you’d like. But, with the correct steps, you may be able get it to where you want it.

Fire Up the Credit Monitoring

The best way to get the ball rolling on rebuilding credit is by monitoring it. Our friends at Rocket HQ offer an excellent way to start doing that.

Rocket HQ lets you view your Equifax credit report and score for free once a month. You also get personalized tips on ways to improve your score. You’ll also be able to track your monthly debts and your credit utilization. Having more insight into your credit on a regular basis will help you with everything we’re going to discuss in the upcoming sections.

Trials and Errors

Between the credit bureaus and the creditors that play a part in developing your credit report, mistakes are bound to happen every now and then. Errors that appear on your report can lower your credit score and be a big headache to fix.

Common errors include outdated information, incorrect payment statuses, wrongfully duplicated negatives, and most importantly, fraudulent accounts. Eliminate any chance of error by sifting through your credit report with a fine-toothed comb. If you find anything that looks unusual, take the proper steps to dispute your credit report.

Pay Down Debt

One of the biggest things you can do to improve your score is to pay down any debts and pay off any collections you might have showing on your credit report. If it’s unrealistic for you to pay off the whole amount, you can try to work out an arrangement with creditors to pay what you can. This shows up on your credit report as “paid as agreed.” While it won’t raise your credit score as much as paying off the debt in full, paying something is better than nothing.

Keep Accounts Open

When you pay your debt down, try not to close the accounts. This could hurt your score because you want to have a variety of accounts open. We’ll get into this more in an upcoming section, but you want to make sure you have a mix of credit cards, auto loans, possibly personal loans, etc.

Also, while you want to pay down debt, it can hurt your credit score to completely close an account. This is because it will eliminate the amount of credit you have available to you. If you close an account, even if you spend the same amount on your credit cards, you’re using a larger percentage of your remaining available credit. We’ll get into credit utilization more below, but for now, you should know that if you use too much of your credit, future creditors may be hesitant to extend loans and other credit to you.

Pay on Time

Another factor lenders look at when you apply for loans is whether you make payments on time. Paying your bills when they’re due will improve your score.

Diversify

Another big key to increasing your score might be to have a good mix of revolving credit debt and things like installment loans like a car or personal loan. Mortgage lenders want to see that you can effectively manage different types of debt.

Increasing Credit Limits?

A good second phase of your credit score rebuild is to try and get your credit limits increased. For example, if you currently have a $500 credit limit, a lender might be willing to increase it to $1,000.

I say this is the second phase because lenders aren’t likely to do it if they view you as too risky. You may want to wait until you’ve been rebuilding for a while.

Credit Utilization

In order to keep your credit score high, you don’t want to use too much of your credit, as this can be a sign of financial stress. The experts at Rocket HQ recommend using no more than 30% of your overall credit limit between all of your accounts. If you have one credit card with a $1,000 limit and another with a $3,000 limit and total carryover balances of $800 per month between the accounts, your credit utilization would be 20% ($800/$4,000).

Getting Back on Your Feet

The journey to reapplying for a mortgage after being denied can feel like an uphill battle, but you can take some steps to bolster your credit score. You can contact your Home Loan Expert today and craft your game plan for being approved.

Looking for more credit tips? Subscribe now to the Zing Blog and don’t forget to visit Rocket HQ for all your credit monitoring solutions!

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This Post Has 139 Comments

  1. We want to get out of renting and get our own home. Both mine and my husbands credit is bad since we filed bankruptcy a couple of years ago and can’t seem to get the score to move. He has a great job and need some help getting started.

    1. Hi Karen:

      One of our Home Loan Experts can look into your situation and offer you some advice and tips on a path forward if you give us a call at (888) 980-6716. Thanks for reaching out!

      Kevin Graham

  2. I have a FICO score of 555. What loans can I apply for to increase my score to purchase a house in the next 9 months?

    1. Hi Jennifer:

      It’s not really possible for me to tell you that because every situation is different and I don’t know your history. We do have a service in Rocket HQ where you can pull your credit report without affecting your score and get personalized recommendations on how to improve it for free.

      Thanks,
      Kevin Graham

  3. Was denied for home loan from quickens about six months ago. Just got a significant jump in income and ready to improve my horrible credit. Credit score 517 right now I have about five accounts that are revolving credit accounts. I am ready to fix my credit to get a mortgage. I need help, want to buy by summer 2018. Help please!

    1. Congratulations on the income jump. We do have a service in Rocket HQ where you can pull your credit report to see the credit report and score for free. It will give you personalized recommendations on how to bring your score up. We need you to be at 580 for an FHA loan and the score for conventional and VA loans is 620.

      My first recommendation would be to get your score up and then we can talk about your mortgage options when you’re ready.

      Thanks,
      Kevin Graham

  4. I have a great income and money down for a home . But my credit is very poor due to a past divorce. Can a large down payment help me get financed for a new home or what should I do?

    1. Hi O’Neil:

      All investors have minimum credit score requirements. A bigger down payment might help, but only in terms of letting you qualify with a slightly higher debt-to-income ratio. I’m going to have someone reach out to offer more personalized recommendations based on your financial situation.

      Thanks,
      Kevin Graham

  5. What is the minimum credit score for qualifying for a program that helps with down payment? I saw a condo in Charlotte that I am trying to get before someone snags it. My credit is between 602 and 620 and was told I would need at least 3 percent down on this 110,000 condo or minimum score of 660 to qualify for no money down. I have been on my job for over 2 years in law enforcement capacity and trying to reestablish myself and plan on retiring in this career. Thank you.

    1. Hi TC:

      Thank you for your service to your community. Currently, we only offer 0% down for qualified applicants through our VA loan program. That said, we do have a 1% down program with a 2% grant that would get you to 3% equity. The minimum credit score for that is 680. The good news is credit can be worked on. If you keep working diligently to improve, there’s no reason to think you can’t be there soon.

      Thanks,
      Kevin Graham

    1. Hi Deborah:

      The best advice I can give is to go ahead and speak with one of our licensed mortgage bankers about your situation. They can offer advice on your challenges and we can go from there. If you go ahead and fill out this form, we can connect you with someone in your state. If you would like to get started over the phone, please call 888-728-4702. Have a great night!

      Thanks,
      Kevin Graham

  6. We have been renting this house for 4 yrs almost. Rent sucks and we have been given a price to buy it. Our credit isn’t great but we have been building it for the past yr trying to get it higherror. We had no option and had to buy a new car which they ran our credit over 14 times in one day and a few more times the next day. So now we have over 24 credit inquires on husbands credit. We got financedone at 21% but do have rate reduction on it. After 3 payments the IR comes down some. Which is nice. We opened a CC last yr to have a revolving account but all our accounts now are too new. When we paid one of my vehicles off it dropped our credit by 60 points almost. I would love some ideas to help, and advice to purchasing our forever home. And how to remove credit inquires if possible. Thanks!

    1. Hi Melinda:

      If the 16 or so inquiries are from the same source, that definitely sounds excessive. I would try to contact the dealership and see if they will remove those for you. If they won’t, you can try going to the credit reporting agencies and disputing the duplicates credit inquiries. I’m going to put the links below. In the meantime, we can definitely have a licensed mortgage banker reach out and look into your options if you go ahead and complete this form.

      Dispute forms:
      Experian
      Equifax
      Trans Union

      Thanks,
      Kevin Graham

    1. Hi Matt:

      I can tell you that 580 is the minimum for FHA and 620 is required for conventional loans. If your credit score fits that profile, you can go ahead and get started online with Rocket Mortgage. If you’re looking at building your credit back up, we can have someone contact you and look into your situation to help you identify areas that may have greater impact. If you fill out this form, someone will be happy to reach out.

      Thanks,
      Kevin Graham

  7. I was turned down by Quicken Loans Rocket Mortgage for a VA eligible home loan. I have been working to rebuild my credit to over 700 for the last two or so years. Credit Karma, my American Express and Cap 1 all say I am 720-756. My credit card usage is just below 30%. There is one negative on my credit report from an account I settled for less than full in 2013 that is closed but still shows balance of 5k. Tried to disputed but was unsuccessful. I am confused and frustrated. Now what!?

    1. Hi Chad:

      I’m going to have someone reach out to take a second look and see if we have any options or advice for you. We can absolutely go over your situation.

      Thanks,
      Kevin Graham

  8. Hi Kevin,
    My husband is 100% total & permanently disabled through the VA. He’s never used his home loan benefit. We would LOVE to purchase a home sometime in the near future but his credit score is around 540 due to medical bills before we had insurance and mine is around 520 mostly due to student loans. I know our scores need to be 620 or better for most lenders to even consider us, so my question is, how do we quickly improve our scores or is that something that will take years to do. Or would we be better off filing bankruptcy? It’s so frustrating to have a sizeable, stable and secure income and KNOW that affording the mortgage is not an issue but NOT be able to get a loan based solely on mistakes made years ago (some out of our control). We don’t even know where to begin! Thanks so much for your anticipated help!

    1. Hi Robert:

      Is there something we can help with? I’m going to have someone reach out.

      Thanks,
      Kevin Graham

    1. Hi Andrew:

      We can definitely have someone reach out to offer any advice they may have and see if we can help you achieve your dream of buying a home in the future.

      Thanks,
      Kevin Graham

  9. Need to refinance my FHA loan. We had a loan mod about 15 mo ago but now I want the lower interest rate and cash out for home improvements out current mortgage holder turned us down even though they were the ones that did the FHA loan mod. I Think that really hurt us when we were struggling for a brief time. Are we out? Husbands score is 640. Mine is 600.

    1. Hi P:

      Every situation is different, but we’d be happy to have someone look into this with you. They’ll be reaching out.

      Thanks,
      Kevin Graham

  10. I am looking to buy my parents house at a much reduced cost, but need to move quickly as they are approved for a new loan and looking to get out. Due to college loans, I’m currently in defaultbut am on a rehabilitation program, and a few other errors I made in my formative years, my credit score is much lower than I wanted. Any recommendations to get my score up quickly?

    1. Hi Nelson:

      I’m going to have someone reach out to look into your best options for getting your score up. Thanks for reaching out!

      Kevin Graham

    1. Hi Peter:

      I’m going to refer this to someone that can go over the best options to help you improve your credit. Have a good day!

      Thanks,
      Kevin Graham

  11. Hi,
    I am 26 years old with bad credit and want to fix it in order to eventually purchase a home. I have one secured credit card and one unsecured to help me build it, however I have other issues to fix and I have no idea how. Can someone please reach out to me with some advice on how to improve my credit score? Thank you in advance.

    1. Hi Marlene:

      The secured credit card and unsecured credit card definitely help. Fixing your other issues will obviously depend on what they are. I’m going to have someone reach out to look into your situation and see if we can help you get that score up.

      Thanks,
      Kevin Graham

    1. Hi Matthew:

      This is absolutely something we help with. I’m going to have someone reach out to go over next steps.

      Thanks,
      Kevin Graham

  12. I need help! My credit is pretty bad around a 518 score and I really want to purchase a house in a year maybe 2

    1. Hi Christopher:

      I’m going to have someone reach out with some credit building tips for your situation and maybe we can get that score where it needs to be. They’ll be in contact!

  13. I’ve paid off all of the derogatory marks on my credit report. I took out 2 secured credit cards in January as well as have a personal loan that I have to try to establish credit And out seems like every time I turn around my score is lower. 2 weeks ago I was at a 617 and once the last derogatory mark dripped off it dripped me to a 598. I’m trying my best but it seems like that just isn’t good enough… Any suggestions?

    1. Hi Tash:

      We can definitely help you with some credit advice and see if we can get your score where it needs to be. Someone will be reaching out.

      Thanks,
      Kevin Graham

    1. Hi Grant:

      I’m going to have someone reach out to you with strategies to get your credit score just a little bit higher. Thanks for reaching out!

      Kevin Graham

    1. Hi Pauline:

      We can’t do that because we want to put you in the best position to succeed. Among other things, better credit scores mean lower rates. That said, I’m going to have someone reach out to you and we can have them look at the best ways you might be able to go about getting your credit score up.

      Thanks,
      Kevin Graham

  14. I have a 580 credit score due to some rocky times with a business a few years back. For the last 12 months or so I have been current. I have found a house for 235,000 that I want to purchase and have a down payment of 185,00 from the sale of my old house as a down payment. Is it possible to get a home loan.

    1. Hi Angela:

      Every situation is different, but we can definitely help you look into your options and suggest the best course of action.

      Thanks,
      Kevin Graham

  15. My credit score is 600, two OLD accounts the other 4 accounts are either paid in full or ontime payments. What can I do, wanting to be approved for a mortage by years end

    1. Hi MyEsha:

      I can have someone reach out to you regarding your options. They’ll be in contact.

      Thanks,
      Kevin Graham

    1. Hi Sean:

      I’m going to have someone reach out to you to determine the best way to help you get your credit in shape. Thanks for reaching out!

      Thanks,
      Kevin Graham

  16. I would like to be approved for this House loan even though my credit score is bad. I am not be hind on my rent payments and I am not the other kind of person to jump on his morgthges payment

    1. Hi Franco:

      I’m going to have someone reach out to you to go over your options for improving your credit score. Thanks for reaching out!

      Kevin Graham

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