 TITLE: How to Buy a Foreclosure if You Have Bad Credit CONTENT: Improve Your Score Before Buying a Home\n---------------------------------------\nResourcefulness may enable you to swing a foreclosure purchase with bad credit, but there's no doubt you'd have better options—including the potential for borrowing from multiple sources at more competitive interest rates—if your credit score were in good shape.\nThat's why, whether you're buying a foreclosure, purchasing from an existing owner or buying a brand-new home from a builder, it's a good idea to go into the process with a clear understanding of your credit standing. Checking your credit reports and credit score before you apply for a mortgage or other financing is a great way to start.\nIf it's lower than you'd like, you can take action to improve your credit score. Depending on your score and financial situation, you may be able to bring about a significant score increase in one year or less by adopting credit habits that promote score improvement.\nCredit scoring firm FICO says the following factors matter most in its score calculations:\n*   **Timely payments**: Paying bills on time helps your credit score, and late or missed payments are the single biggest factor that can lower it. Payment history accounts for as much as 35% of your FICO® Score☉ .\n*   **Credit usage**: Experts recommend using no more than 30% of your total credit card borrowing limit to avoid lowering credit scores. Also known as your credit utilization ratio, your credit usage rate is responsible for 30% of your FICO® Score.\n*   **Length of credit history**: Your FICO® Score tends to increase over time. You can't accelerate the process if you're a new credit user but establishing a record of timely payments can help you build up your scores as your credit history increases. Length of credit history accounts for up to 15% of your FICO® Score.\n*   **Credit mix**: Credit scores take account of all your debt and the different types of credit you use. The FICO® Score tends to favor a mixture of loan types, including both installment credit (loans with fixed monthly payments) and revolving credit (such as credit cards, with variable payments and the ability to carry a balance). Credit mix can influence up to 10% of your FICO® Score.\n*   **Recent credit activity**: Applying for loans and credit cards triggers hard inquiries, which keep track of when lenders check your credit score for use in lending decisions. Hard inquiries typically lower your credit score by a few points, but as long as you continue to pay your bills on time, scores usually rebound within a few months. (Checking your own credit triggers a soft inquiry, which does not affect your credit score.) Recent credit activity contributes about 10% of your FICO® Score.\n*   **Derogatory information**: Certain credit report entries can severely lower credit scores for extended periods of time, depending on the nature of the information. The negative impact of these entries diminishes over time, but initially at least, they can drive down your credit score and keep it down for months or even years. Because these entries are not found in all credit reports, FICO doesn't assign them percentage weights.\nWhile it's possible to purchase a foreclosed home when you have bad credit, taking steps to improve your credit scores may prove less difficult—and more practical in the long term. END