It can be devastating to be turned down for a home loan/mortgage because of low credit. If you are thinking of buying your next home but have been turned down for a loan or the interest rates you were offered were ridiculously high, then this is most likely due to bad credit and you need to take a few steps to improve your credit score.
You have to remember that when a lender looks at an application from you for a home loan and sees that you have low/bad credit, you will be turned down because they will consider you "risky" to do business with. They're not sure you'll pay them their money back.
You can improve your credit score before applying for the loan if you act fast. Don't wait until the last minute when you're applying for a loan to try to raise your score. It will take some time to get your credit turned around.
The reason why you want to raise your credit score first and then apply for the loan is because if your credit score is good, you'll have a better chance of getting a loan and one with a better interest rate.
As a first step, you need to get copies of all three of your credit reports. Look over them carefully to make sure that they all match and there is nothing in them that should not be there. If you find something, you need to let the credit agencies know as soon as possible. If you see some negative things, but these are accurate, you must fix this by paying the debt off. Call your creditors and make an arrangement to pay, even in small amounts.
Pay as much as possible on a regular basis to show that you're trying hard to repay your debt. If the creditors see that you're trying, they'll be more willing to report it to the bureaus, which would affect your credit scores in a positive manner.
Another thing that works for some people is disputing a negative item that they know to be correct. The reason this works is because the credit agencies have to verify the information within a specific timeline, if they miss the deadline, they have to delete the item from your report.
This is legal but not recommended, because even if they delete the item for now, there's a possibility that it would be included in your report again once they have verification. So it's not worth the effort.
The rest is just good practice, make sure all your other bills are paid on time and there is nothing outstanding. Believe it or not, late payments will show on your report and lower your score.
Unfortunately, some things will be hard to have removed from your reports, but don't let that stop you from trying hard to get rid of the negative items. Don't be afraid to ask for a reinvestigation from the credit reporting companies, since it sometimes helps.
If not, you'll have to drop the case and concentrate on what's really important - trying to make more positive items appear on your credit rating reports. Once you've done what you can to improve your credit score, start checking around for lenders to apply to for a home loan.