Credit scores indicate to lenders how well you manage money. You can improve bad credit by demonstrating that you can now handle money more responsibly. Furthermore, since poor credit scores translate into high interest rates on home loans, an improved score will help you get lower interest rates when you are ready to qualify.

FHA loans are loans the FHA insures against default, meaning that lenders are offered a guarantee that if the borrower fails to make loan payments, the debt will be covered by the FHA. Consequently, lenders are far more willing to extend mortgage loans even to people with low credit scores. Furthermore, FHA loans allow you to purchase a home with a down payment as low as 3.5 percent.