One of the most common hurdles to getting a mortgage or refinancing your home can be a less-than-stellar credit rating. But it isn't always a stop sign on the road to homeownership. To overcome this problem, credit counselors advise you to come clean with potential lenders and offer a good explanation.

   Having two or three late payments on your credit report isn't going to stop most lenders. But if you've had a number of 30-day late payments, or you've been more than 60 days late on any payments, or you've defaulted on a loan within the past two years, you need to be ready to do some serious explaining.

   Tell the loan officer about any credit problems when you apply for the loan. By candidly volunteering the information and offering an explanation – perhaps a layoff, unexpected medical bills, divorce, or unanticipated emergency home repairs – the lender may still consider you a good risk. If this approach doesn't work, you might consider using a mortgage broker who specializes in helping poor credit risks.

Check Your Credit Rating Early In Purchase Process
   Have you asked for a credit report recently? If you are thinking of buying a house, it's a good idea to ask for a copy of your credit report now, rather than waiting until you apply for a loan. If there are any mistakes on it – and mistakes can happen – you will need time to correct them.
   If negative, but accurate, information appears on your report, you can request to have a short explanation put into your file.

Raise Your Credit Rating
   Before shopping for a home, it's a good idea to check your credit record. Under the Fair Credit Reporting Act, you can have a credit bureau correct any incomplete or inaccurate information for free. This means the credit service must re-check with the creditor on information you dispute and correct any inaccuracies or omissions. If the item cannot be verified, it must be deleted.
   If the dispute is still unresolved, you may add a statement of up to 100 words to explain your side of the story.
   If you have accounts not listed with the credit bureau, but wish them to be added to your file, the credit bureau may charge a fee to add the other accounts.