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From the Experts at Credit.com

How Soon Can I Get a Mortgage After Credit Problems?

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Nobody likes hearing “it depends,” but for someone wanting to get a mortgage with bad credit, this vague answer can actually be reassuring, especially when it opens a previously-closed door of future homeownership.

What does that mean? Well, “it depends” on what the problems were and how long it’s been since you had those problems.

Negative Items on Your Credit Reports

Traditionally, someone with credit problems — like those brought on by foreclosures, bankruptcy, or general poor financial health — will have a hard time getting a mortgage (especially one with good terms and conditions) until these negative items age off.

For example, bankruptcy can be reported for 10 years from your filing date. One exception is a Chapter 13 bankruptcy, where the debtor pays back some or all of the debt over time. Discharged Chapter 13 bankruptcies may be removed seven years from the filing date.

Here’s a breakdown of how long some common negative items can stay on your report.

  • Bankruptcies: 10 years from the filing date; Seven years for Chapter 13 cases
  • Foreclosures: Seven years
  • Late Payments: Seven years from the late payment date
  • Collection Accounts: Seven years and 180 days from the delinquency date on the original debt
  • Short Sales: Seven years
  • Repossessions: Seven years
  • Judgments: Seven years if it’s paid; potentially longer if it’s unpaid
  • Tax Liens: Seven years after they are paid
  • Charge-Offs: Seven years from the date the account was charged off

Remember, your home loan application will be looked at closely, and your credit blunders may mean you don’t get the lowest rates or best terms and conditions, but that doesn’t mean all hope is lost. If you’re ready to get the home of your dreams, it’s time to take action on improving your credit.

Steps to Take to Help Get Ready for a Mortgage Application

  1. Figure Out What’s Hurting Your Credit

Before you apply for your mortgage, you’ll want to review your credit reports regardless of where your credit stands. (You can get free copies of your credit reports every 12 months from each of the major credit bureaus — Equifax, Experian and TransUnion — by visiting AnnualCreditReport.com.) This gives you a good starting point to first see what credit problems are affecting you, as well as to look for any errors that may be bringing down your scores. If you see something wrong, this guide explains how you can dispute credit report errors. Credit bureaus have to respond to any disputes you file within 30 days (sometimes 45 days).

  1. Do Your Part to Improve Your Scores

If you can hold off applying for a mortgage until you’ve done some work to improve your scores, it may ultimately save you time and money. Things like making your payments on time, limiting the number of inquiries you make on your credit, and paying down your debts to improve your credit utilization ratio can help significantly. You can monitor the effect these behaviors are having on your credit by taking a look at two of your credit scores for free, right here on Credit.com.

  1. Consider Seeking Professional Advice

There’s a lot you can do to repair your credit on your own, but if you’re having a hard time, it’s good to know that there are other options. Professional credit repair experts may be able to help you with everything from filing disputes to figure out the necessary supporting documentation. You can read more about using credit repair companies.

  1. Save Where You Can

While you’re working on improving your credit, it’s a good idea to start (or continue) setting money aside. The more you can save for a down payment, the better off you’ll likely be. A larger payment upfront can be appealing to lenders and also can potentially mean less interest over time and lower monthly payments. However, this doesn’t mean you shouldn’t be using the money to pay down debts (and, in turn, improving your credit utilization).

Remember, bankruptcies and other significant credit problems don’t automatically lock the door on getting a mortgage. You just need to think strategically and do your best to get your credit moving in the right direction.  


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