For whatever reason lending eventually comes down to The Score. I was never so keenly aware of this until I went to refinance my 2 year ARM as a self employed person at the same time my friend was trying to buy their first home. The Score determined that they were able to purchase with 3% down and I was not able to refinance above 60%.

Now, before you think I'm perfect, I am not. But the raw deal is that my being late on our mortgage 13 months ago played a bigger role in my score than my friends bankruptcy - a 70 point difference in their favor! This was the only negative listing on my credit including inquiries. This still doesn't make sense to me.

As far as options for bad credit history, I have found that knowing your credit history will keep you from trying to do things you can't. My score was 580, my friend with the bankruptcy was 620. And with the sub-prime market looking more like the story of Chicken Little, anything below 620 isn't going to fly. My lender, Michele Palm at Desert Hills bank in Spokane, WA says, "Many lenders aren't lending below 670 because they were so burned by the sub-prime market over the last year."

If you find yourself below that line, take a critical look at what is on your credit with your mortgage professional and see what might be affecting you. Then call your creditors and see if you can negotiate for re-reporting or deleting the reporting. You may have to pay something to get this. Once they've agreed ask for a letter stating the agreement and when they will do the reporting, Then get a copy of the letter to your lender so they can use it to re-score your credit immediately.

One of Michelle's suggestions for us was to raise our limits by even a hundred dollars because of high balances. If you've paid on time for the last six months that shouldn't be a problem. If you haven't actually used the card in over a year you can ask to have the interest rate severely reduced. We did that with our CHASE card - we hadn't made a purchase in over six years. They were, however a bit slow to report the changes to our credit.

Michelle says the best way to get financing without being perfect is through FHA. FHA's lending standards during slower economies is usually a better fit than other lenders so you could qualify through them when no one else will touch you. Some lenders allow a portion of your down payment, a minimum of 3%, to come through the seller. If the value of the home is there, you can also reduce your out of pocket cost by negotiating for Seller Paid Closing Costs by increasing your offer.

Learn more about this author, Sean Siemen.
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