Despite what many fly-by-night credit repair companies tell you, you need good credit to get a good mortgage interest rate. Good credit means you pay back what you've borrowed and you do so on time. Even just a few late payments can have a negative impact on your mortgage possibilities. Meanwhile, defaulting on payments, a bankruptcy or a past foreclosure can preclude you from almost any kind of financing.

However, not all financing possibilities are eliminated - there are still options for those with bad credit. In this article, we'll discuss home financing that's available to consumers with bad credit scores and also how you can start improving your credit to renegotiate for a better mortgage beginning tomorrow.

Mortgages after Bankruptcy or Foreclosure:

If you've filed for bankruptcy or lived through a foreclosure, it's still possible to get a home mortgage. However, in the case of a bankruptcy, you need to wait at least two years before you're eligible to qualify. Prior to the two years, you'll need to go through a mortgage broker who specializes in bankruptcy mortgages.

Ideally, the lender is going to want to see a few new and open credit accounts that show you've been paying your bills consistently and on time for the last two years. Consistency and reliability over a period of time are critical for the restoration of your good credit.

If you have gone through a bankruptcy, always disclose it to your lender. Remember, a bankruptcy is a public notice, meaning that information is easily accessible. You should also try to get pre-qualified before you begin searching for a home.

How to Build Better Credit for a Better Mortgage:

If your FICO score is too low to get a great interest rate, you can certainly take an additional year or two to improve your score and reapply later. Resist the temptation to jump in prematurely for an interest rate you will later regret. Keep reading to learn how.

1. Always review your past payment history and make any necessary corrections. Payment histories carry the most weight on your credit history, so it's important that they're accurate. If you find any inaccuracies, challenge them, especially where you have access to documentation that validates your claim.

2. Get your balances down well below your credit limit. Ideally, you want your debt to be at about or below 30 percent of your overall available consumer credit.

3. Don't open a lot of new accounts all at once. Taking out multiple new credit cards or loans in a short period can hurt your credit score, especially if you have high balances on these accounts. If you have open a lot of active accounts, transfer the balance of some over to others with lower interest rates, and close the empty ones.

4. Don't take loans from financing companies or payday loan companies. Not only do they charge high interest rates, but borrowing from them can also lower your credit score. Consider them to be a lender of last resort.

Once you've worked at raising your credit score, wait a few weeks before reapplying for your loan. It takes time for creditors to update your file.