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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.


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. Last year I applied & was turned down for a home equity loan on my home which is mortgage free. Three yrs ago I had no credit card debt at all & bought my new home with the proceeds from the sale of my former residence. I moved in with my grown son who was sharing 50% of the household expenses. I opened a number of credit cards to purchase appliances, furnishings, landscaping. At the time the cards were interest free; some for 12 months & 15 months. I also took out a loan for my shed, fencing & paving my driveway all done counting on my son’s contribution. Sadly, less than a year in my new home, my 28 yr old son passed away under tragic circumstances. After that, I went through an extended period of time where I had trouble keeping my personal affairs in order. On top of that, with the loss of his income I not only could not pay the balances before the interest kicked in, I also had to use the cards just to pay my monthly expenses & my credit utilization is now at almost 60% which is not good. Since I was turned down for the home equity loans last year, I have paid down some of my debt, took a 2nd p/t job & raised my credit score from 540 to 620 & I have a 98% payment history only because in July of 2018 I was struggling & missed one payment on several cards. Since then I have all my cards on auto pay & have not missed a payment but am only able to make the minimum which up to 3/4 of it goes to interest.
    I haven’t reapplied for the home equity loan because I wanted to have longer time with my new job, get my credit utilization down & raise my score to 640. When I was turned down last year, it was for my low credit score but primarily because of my debt to income ratio is too high. I find it so ironic because that is exactly why I want & need the loan to pay off all my debt & have the one payment with a low interest rate. I don’t plan on or need to utilize my credit cards to pay my monthly expenses now, but would keep them for emergencies & to earn the rewards on them; paying the balance in full each month. I’ve even been researching reverse mortgage loans as I am 62, but I am hesitant because I don’t want that to be a issue to my other two children to pay should one of them want to keep my home when I pass. I am open to any suggestions & advice you can give me before I make any decisions or move forward to re-apply for a home equity loan.
    Thank you!

    1. Hi Debra:

      That sounds like an incredibly difficult situation and I’m sorry to hear about your son. I can talk through some of your options, but it also might be best to speak with a financial advisor before you make a decision. In your situation, it sounds like you could use someone who can take a holistic look at your financial picture.

      We don’t do home equity loans, but we do cash-out refinances which are similar and can come with a lower rate. The problem I think you’re going to run into is that you may not qualify because of your debt-to-income ratio (DTI) and current utilization.

      I really think a reverse mortgage might be the best option for you to look into since you own your home free and clear. I understand your concerns, but I think many of them stem from myths around reverse mortgages, so I want to clear a few things up.

      The most important thing to understand is that a reverse mortgage is a nonrecourse loan. That means when you move out or pass, your heirs would not be responsible for the loan. When you’re no longer in the home, your heirs have three options: If they want to keep the home, there’s the option of refinancing the reverse mortgage into a traditional mortgage and making the payments going forward. The second option is to sell the home. Anything left over after the reverse mortgage is paid off is theirs to keep. Finally, they can just turn the house over to the lender. Since it’s a nonrecourse loan, no foreclosure goes on anyone’s record.

      If you take out a reverse mortgage, you’re only responsible for property taxes, homeowners insurance and maintenance of the property moving forward and the payout from the mortgage itself could be one option to help you pay off your bills. Our friends at One Reverse Mortgage could help you look into your options. I recommend speaking with one of their Reverse Mortgage Experts at (888) 980-1543.

      Again, there are many different options and you should speak with someone who can really dig deep on your financial profile moving forward, but I think this is one option for you. I wish you luck with whatever decision you make!

  2. That is my e-mail. Lately this has been happening . Not that often but o ly with important issues. You the first to allow why

    1. Hi Joanne:

      I’m glad to hear you’ve had a positive experience. I wish you continued luck as you build your credit back up.

      I’m not sure what you’re referring to that has been happening lately, but I did want to assure you that your comment went through. It doesn’t show up right away sometimes because the cache is only cleared on each page once every 24 hours in order to speed up load times. Thanks for sharing!

  3. I have starting to work on building my credit score. I check it once a month or they email me letting me know how I’m doing. I’ve also learned what you do to increase your score, if it has dropped, stayed the same they inform you why. I have been building my credit score
    I’m so happy the past has not been used to stop me

  4. How long does it take to rebuild your credit when you start paying off your debts? Do hospital bills count just as bad against you as other bills?

    1. Hi Amy:

      As to the second part of your question, the new credit scoring models treat medical debt differently in a lot of cases. It’s not viewed as badly as some other debts.

      In terms of how long it takes to rebuild your credit, that depends on the depth of the problem and just how you choose to attack it. I’m going to recommend you check out our friends at Rocket HQ. You’re able to get a free VantageScore 3.0 version of your TransUnion credit report and score every two weeks along with personalized tips on the problems with your credit and how you can improve. You can also return to one of our Home Loan Experts to go over your personal situation and get tips. They’re available at (888) 980-6716. Hope this helps!


  5. Hello I need guidance due to some things on my credit I know I need a secured card but need some one to help me remove old accounts that were paid . Need someone to advocate for me who can I get for that . I’m also disable with 2 disable kids and have section 8 with a score of 480 advise please. trying to purchase a home for my kids and myself single mom and surviver of domestic violence worked all my life until I got sick ., Thank you for your time . Good luck to u all GB.

    1. Hi Gail:

      That sounds like a difficult situation. I’m in a wheelchair myself and I know disabilities cause their own complications to the best laid plans, in addition to everything else you’ve been through. I’m going to attempt to give you the best advice I can.

      It’s ultimately up to the creditors with whom you owed the bill to remove any old accounts that went into collections or charge-off status, for example. Their willingness to manually remove the collections or charge-offs from your record is probably more likely if the collections or charge-offs were paid in full rather than an amount negotiated that with less than what you owed. However, a misconception people have is that debts that go to that level of delinquency are automatically removed from your credit report if you pay them off. That’s not the case. Creditors may be willing to work with you if you make the full payment, but you have to ask specifically for the removal. If they’re willing to work with you, removing the bad accounts would likely significantly raise your score. The good news is they come off your poor automatically after seven years. Also, the older the debts are on your report, the less impact they have on your score.

      The other thing I might tell you is that there are likely nonprofit credit counseling agencies in your area who might be able to help give you a game plan.


  6. I”m looking to sell my house,and i plan to make a nice profit off the sale,but the problem I have is that my credit score is low,and how do I go about buying another house even with 20% down payment.

    1. The tips in this blog post are a good start. There’s also a service we offer in Rocket HQ where you can get your report and score for free with personalized tips. Finally, I’m going to recommend you contact one of our Home Loan Experts who may be able to help you with an improvement plan for your credit. Hope this helps!

      Kevin Graham

  7. I’m working on my credit (poor) and want to know how I can get it up. I’m a first time homebuyer? Went to that program for the first time homebuyer and was told that I needed a better paying job. What steps should I take to getting my score higher?

    1. Hi Chrissy:

      It doesn’t sound like that program was very helpful. Sure, a better paying job helps, but what also helps is taking a look at your budget overall and determining if there are any areas where you can cut back. Then, you just put as much as you can toward your debt. If you follow the tips in this blog post, that will also help. I’m also going to recommend you check out Rocket HQ. You can pull your credit report and score for free without affecting your score. The service will give you tips on how to improve. You can also speak with one of our Home Loan Experts. They may be able to give you advice that gets you headed in the right direction. You can give them a call at (888) 980-6716.

      Hope this helps get you started. Have a great day!

      Kevin Graham

  8. My credit score is 567, I am divorced and my husband has mortgage in his name but I am on deed. Is there a way I can get help on assuming mortgage in my name.

    1. Hi Terrance:

      If you’re looking to assume the existing loan, you would have to be awarded the property in the divorce and then work with the existing lender and/or servicer. They may require that you improve your credit. Typically, you need a credit score of 580 to qualify for an FHA loan and at least 620 for a conventional loan. Starting with the tips in this blog post will help. You could also check out Rocket HQ and get tips based on your report. Thanks!

      Kevin Graham

  9. I’m looking to buy a home. I’m a first time home buyer, but I have poor credit. What can I do to improve my score?

    1. Hi Kathy:

      The tips in this blog post are a good start. It would also be good for you to check out Rocket HQ and get personalized tips based on the information in your credit report. Finally, one of our Home Loan Experts may be able to give you ideas if you give us a call at (888) 980-6716. Hope this helps!


  10. The only reason why my credit is bad is because of hospital and doctor bills one cell bill. We pay rent on time. lot rent own our own mobile home.

    1. Unfortunately, we don’t do mobile home financing. However, we may be able to help you improve your credit. We do have a service in Rocket HQ where you can get personalized credit tips based on your report to try and improve your score. Hope this helps!

      Kevin Graham

  11. My credit is terrible is there anybody or company who can help get my credit together to become a first time homeowner.

    1. Hi Bridget:

      The tips in the blog post are a good place to start. I also recommend you speak with our friends at Rocket HQ. You can get your credit report and score for free once a month without affecting your score. You’ll also get personalized tips on how to improve. Finally, you could also speak with one of our Home Loan Experts at (888) 980-6716. They may be able to offer helpful advice and see if we can get you where you need to be.

      Kevin Graham

  12. its sad that credit scores stop you but whats most saddest you reach out for help and there is no helpyou say even with bad credit you can help thats a lie But whats so sad is my mom used my name anarest her soul but im stuck with this bad credit and i cant get help

    1. Hi Peggy:

      I’m sorry to hear about your problems with a stolen identity. That’s a bad situation, but you don’t have to be stuck there forever. The first step is to dispute any accounts your mom opened that aren’t yours. All three credit bureaus have dispute resolution processes. Merely by getting those accounts removed from your report, you should see a substantial difference. And then you can work toward building your own credit record on its own merits.

      We do have a few resources intended to help get credit profiles in order so that our clients can qualify. We may not be able to get you qualified for a mortgage right away, but we can point you on the right path to accomplish this and other financial goals you may have in the future.

      I see that you’ve reached out to us. I’m going to have someone contact you about any potential options we have to help you with your situation. I wish you luck! You can get through this.

      Kevin Graham

  13. This was the best info received on my interest in buying a home. I once had perfect credit due a lost job bills acquired during that time got hard to keep up making less income. I am rebuilding my from 495 to 555 in less than 3 months which I think is good. I’m more determined to buy thanks to these helpful tips, I’m on my way.

    1. Hi Gay:

      I’m glad to hear you’re starting to turn things around and that this was helpful. If you’d like further credit advice, Rocket HQ lets you pull your report for free without affecting your score and gives you personalized tips on how you can improve based on your score. Once you’re ready to get a mortgage, (580 FHA, 620 for conventional), you can either get started online through Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716. Good luck! It sounds like you’re well on your way.

      Kevin Graham

  14. Hello, my 2 sisters and I inherited my mom and dads mortgage free home, I would like to buy them out of the home, my credit score I’m working on its 557. I would like some information what kind of loans could I qualify for.

    1. Hi Kelly:

      We can’t help you with a mortgage until your credit score gets to 580 and then we can look at FHA loans. I’m going to suggest you check out Rocket HQ. You can get your credit report and score for free without affecting your score. Moreover, you can get tips on how to improve.

      I’m also going to suggest you speak with one of our Home Loan Experts by calling (888) 980-6716. They may be able to offer you some helpful tips.

      Kevin Graham

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