A low credit score doesn't have to stop you from getting a mortgage loan approved. But knowing what's in your credit report helps before submitting a loan application.

With that in mind, experts recommend taking the time to find out what your credit report contains before initiating the loan application process. That way, you'll have time to better your score and improve your chances of qualifying for a mortgage loan.

Know Your Score Before You Apply

Under the Fair Credit Reporting Act (FCRA), every 12 months, you are entitled to a free copy of your credit report from each of the three major credit bureaus - Experian, Equifax, and TransUnion. You can order your free annual report from each of the three bureaus at the same time, or separately at different times throughout the year.

However, be forewarned that if you request reports from the credit bureaus directly rather than from AnnualCreditReport.com, you may have to pay for the report.

Although the free annual report doesn't include your credit score, it explains risk factors appearing on your credit history that impacted your score. This helps identify areas to work on should you need to increase your score.

While you can request your score from the national credit-reporting agencies for a nominal fee, check with your credit card company first. Some include your score on your monthly statement; others will provide it free.

Take Steps to Improve Your Score

What's in your credit report not only affects whether you get the loan, it also affects for how much money you qualify. Incomplete or wrong information can cause a denial of your loan application or get you less money than you need.

Once you receive your credit report, check to see that the information listed is current, accurate, and complete. A quick way to raise your score a few points is to correct even simple errors. Each credit bureau provides information on how to fix mistakes on your report.

Make the Most of Your Score

When you know your credit score prior to applying for a mortgage loan, you're in a better position for shopping rates. Armed with the knowledge in advance, you'll know whether a lender offers you a good rate.

You still may qualify for a home loan with a lower credit score, but you'll pay a higher interest rate, increasing your monthly mortgage payments and overall cost of the loan.

For example, a FICO score ranging from 680 to 699 could mean paying nearly $17,000 more in interest payments over the life of the loan than if you had a credit score above 760. The better your credit score, the better the loan terms you can negotiate.

If you have a borderline credit score, paying off some debt before you apply for a mortgage will help lower your debt-to-income ratio. Your credit score tells a lender whether you are worth the risk, whereas your debt-to-income ratio indicates whether you can afford the loan.

Consequently, a lender may recommend that you pay down one or more lines of credit to improve your chances of qualifying for a mortgage loan. If you lower your debt burden, this also helps increase your credit score.

Qualify Even With Imperfect Credit

Lenders differ in their credit requirements with some mortgage lenders accepting credit scores as low as 620. However, lenders that approve conventional mortgage loans despite a low credit score typically have additional requirements you must meet to get the loan.

For instance, a lender may require that you have no recent history of late payments, don't live beyond your means, and have your credit card debt under control. Despite past credit problems, if you currently make on-time payments on all your debt obligations and meet a lender's other requirements, the lender may approve you for a loan.

For more information on the loan options available to you based on your credit score, contact Loan Fox Inc.