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1. Regularly Monitor Your Credit Report For Errors
Even if you have good credit, all it takes is one case of identity theft to damage a high credit score. Check your credit report every six months, and examine the contents for errors or unfamiliar accounts. Fixing minor inaccuracies are easy, and won’t result in a huge negative impact on your report. If possible, sign up for a credit monitoring service and receive email alerts.

2. Make Timely Payments
One of the easiest methods of increasing your credit score and obtaining a low interest mortgage is making timely payments. Submitting payments one day late can reduce your score by several points.

3. Establish a Realistic Budget
Unforeseen occurrences such as loss of employment or sickness can create credit and money problems. On the other hand, the root cause can be poor money management or uncontrolled spending habits. The best way to gain control of your finances is to make wiser credit decisions and create a plan that enables you to improve your personal finances.

4. Make Installment Payments
Some individuals choose to payoff bills with one lump sum. However, if looking to boost a low credit score and qualify for a low-interest mortgage, consider paying off bills in installments.

5. Don't Open New Credit Accounts Three to Six Months Before Applying For a Home Loan
Before qualifying you for a mortgage, lenders look at your income and debts and determine an overall debt-to-income ratio. To be considered a good candidate for a mortgage, and receive a favorable loan rate, borrower must keep their debts low. Opening several new accounts within a short period creates doubts in the lender's mind. Plus, numerous credit inquiries lower your credit score.

6. Get Current on Late or Missed Payments
If your current bills are 30, 60, or 120 days late, contact your creditors and arrange payments. Statements that remain unpaid for a long period can drastically decrease your credit score.

7. Offer Mortgage Lender a Written Explanation
If you can justifiable explain the reason that caused a low credit score (illness, temporary disability, loss of employment, etc.) the mortgage underwriter may accept a written explanation. When the underwriter is "on the fence," this explanation may sway them to approve the loan request.

8. Be Aware of Back-end Ratio
Before buying a home, make sure you take into consideration other monthly expenses such as utilities, transportation, insurances, food, etc. Some buyers mistakenly pour all their monies into paying the mortgage, and have little funds left over for other expenditures. A good mortgage lender will approve you for a loan amount that fits into your budget. Ideally, your back-end ratio should not exceed 36% (total monthly payments divided by gross monthly income.)

9. Maintain Three to Five Credit Accounts in Good Standing
When reviewing your credit for a home loan, mortgage lenders want to see at least three credit accounts in good standing. Good standing means you pay the accounts on time. This proves your credit worthiness, and shows that you can responsibility repay creditors. Once you open a new account, maintain the account for at least six months, and then apply for a home loan.

10. Is The Mortgage Lender Trustworthy?
It is important to choose a reputable sub prime mortgage lender. If you question the lender's character, or you feel pressured to falsify loan documents, choose another lender or broker.

11. Never Close an Old Account
Closing a credit account will shorten your credit history and decrease your credit score. Even if you don't plan on using the credit card, always keep the account open.

12. Create a Cash Reserve
Mortgage lenders will ask questions about liquid assets or cash savings. Bad credit applicants with ample savings may qualify for better rates on a loan. Having a cash reserve that equals at least three months of mortgage payments gives you negotiating power.

13. Fannie Mae and Freddie Mac Services Bad Credit Mortgage Loans
This is great for sub prime or bad credit borrowers because these lenders offer better rates, which can potentially save you money.

14. Anticipate Paying More for the Loan
Individuals who apply for a mortgage with poor credit are considered very risky. Thus, lenders charge these persons a higher rate because the default rate is higher with sub prime borrowers. Additionally, some shady lenders take advantage of bad credit borrowers can charge ludicrously high rates and fees because their choices are somewhat limited. For this reason alone, shopping around and talking with multiple lenders is smart.

15. Bad Credit Borrowers Have Options
Even though your home loan options are limited, you do have plenty of choices. Several lenders offer bad credit loan programs, which are designed to get you approved, and help you rebuild your credit. Talk with a few mortgage brokers and explore all available options.