There are many factors that are taken into consideration when you are trying to get approved for a loan or mortgage. Your credit score or rating can be one of the most important factors that lenders consider when you are trying to qualify for a mortgage or other type of loan. Negative items on your credit report can cause your credit score to deteriorate and lower credit scores can cause you to pay a higher interest rate or to get turned down for the loan completely. Whether or not you think you have bad credit, you should take these steps before applying for any loans to be sure that everything is correct when it comes to your credit report. 

Steps to Fix Bad Credit

Step 1. The first thing that you should do before you apply for a loan or mortgage is to request and obtain a credit report from each of the three credit agencies (http://www.transunion.com/, http://www.experian.com/ and http://www.equifax.com/ ).

Step 2. When you receive each of the three credit reports, review each report separately and mark anything on the reports that are negative, incorrect, or items that you do not recognize as yours.

Step 3. Once you have identified all of these incorrect items write a letter to each of the credit agencies disputing the negative, incorrect or unrecognizable items that are showing on your credit report. Give a complete explanation as to why these items are incorrect or not yours.

Step 4. If there are items on your credit report that are your items (such as late payments or unpaid items), then contact the creditors and collection agencies that are handling your bad debt to make payoff and/or payment arrangements. Negotiating and making payment arrangements with creditors and/or collection agencies and carrying through with these arrangements will remove these blemishes from your credit reports and help to improve your credit score and credit rating.

Step 5. Once the blemishes and bad credit have been removed from your credit reports, the credit agencies will send you a new credit report which will show the corrected or deleted items, your new credit score, etc.
 
After You Fix Bad Credit

After you have your credit fixed you will be able to apply for mortgages and loans and receive better credit terms. Borrowers with good credit tend to receive lower interest rates and more favorable loan terms. This is why it is very important to stay on top of your credit score and credit report, checking it on a regular basis for incorrect items or items that are not yours.