Building Up Your Credit Score – Why it Helps

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Based on the FICO credit scoring system, credit scores range from a number between 300-850. The higher the score, the more excellent it is and will ultimately allow you to qualify for the best mortgage rates and terms. This is because your credit score is built up slowly through either having a credit card or taking on loans, which they base on your ability to pay the loan on time.

Excellent credit is a number upwards of 740, while an average score ranges from 640-679, and a bad one is anything below 600. Those with better credit scores are more likely to take on loans because lenders are sure that these people are capable of paying back eventually at the promised rate. Those with average to low ratings will suffer to receive mortgage loans.

Borrowers with low ratings often need to deal with specialized bad credit home loan lenders, who offer significantly different requirements from the traditional loans. Some of these include larger down payments and substantial financial reserves, along with higher interest rates.

How Do People Get Bad Credit?

People who have bad scores fall into several categories

  1. They have no records yet, so there is nothing to base the score on. This can be remedied by using credit cards or taking an auto loan to start a credit score record.
  2. They carry too much debt through maxing out credit cards. This will greatly affect scores, so make sure bills are paid in full and on time.
  3. They often miss bill payments. This can create a pattern that looks awful to the eyes of a lender because they will get ideas on improper money handling.
  4. They default on loans or had them referred to collection. This shows lenders that the borrower may just cancel on them.
  5. They have been through a foreclosure or bankruptcy. These have some of the biggest negative effects on credit due to being compounded with defaults.

How Do I Shop for Mortgage With Bad Credit?

There are several bad credit lenders who exist and will lend to those with lower ratings usually with higher rates. This is why it is important to find lenders that will offer the best rates and most favorable terms. Take note as well of account closing fees and other loan terms as these have an end impact on the total cost.

These agencies may be easily found through searching the internet, wherein you can check offerings as well as compare them with other rates based on your credit situation.

Hiring a broker can be useful when searching the real estate market with bad credit. While they do not issue loans themselves, they usually work with different lenders to come up with the best loan terms for you. Being professionals in their field, they can often save you the hassle of coming up with a mortgage lender for bad credit with a fee, of course. Overall, the requirements and end expenses for bad score holders are much higher than that of those who hold excellent ratings. This is why it pays to bump up your ratings as much as possible.


While it may seem hard to maintain a good score, having a bad one does not mean that it is the end of the world. There are still options, albeit very difficult ones. These extra steps will need to be taken in order for you to achieve your dream house or car, but they are definitely doable.

We offer expert financial advice as well as mortgage professionals in Colorado. If you have any trouble reaching your goals for credit scores or mortgage deals, we’re here to help!