As you begin the process of buying a home, you find that your credit is usually the deciding factor in the approval or rejection of a loan. Your credit score and rating makes the difference between low, affordable interest rates, and high, barely manageable ones.  Luckily, those with bad credit have been saved from those high interest rates with FHA loans. FHA loans were established in order to assist those with bad credit ratings to get home loans, but as of late there have been problems with those who have received the loans that put the status of the FHA loan program in jeopardy.

Defaults are the main issue when it comes to FHA loans. Recently the default rate for FHA loans have skyrocketed from 1.5 to 2 percent to 8 to 8.5 percent! This is a serious increase and poses major concern for lenders. Lenders are concerned because when a customer defaults on their loan the lender loses money. In this current economy, lenders cannot afford to lose money; and, this results in a tightening of lending restrictions and those with bad credit feel it the most.

Lenders are raising the score you must have in order to get a loan because they have seen that the most defaults occur when the consumer has a credit score of 660 or less. Those with scores in the 580-620 range had a chance of being approved for a loan but as the rates of defaults are increasing, the ranges of approval scores are soaring. The minimum range for home loans is getting to be 620-660. This leaves a lot of America’s population out of the running for a home loan, and still disenfranchises those who have the optimum credit score because they will have to pay a larger down payment in order to prove that they are not taking on a debt that they can not handle.

If you know that your credit score is not up to par and you are in the market for purchasing a home. Do what you can to raise your score before you start the process. Order your credit report, and make sure every entry is correct. Over 50% of Americans have at least one incorrect entry on their credit report, and those errors can lead to a steep drop in your credit score, which often leads to a speedy rejection in your quest for a loan.

If you do not find any errors on your credit report, but don’t know how to go about increasing your credit score, don’t hesitate in consulting a credit repair professional. They are knowledgeable and trained to come with a credit repair plan that is best for you. If you do your homework and make sure that your credit is in the best possible shape, you will be in the house of your dreams in no time!