Modric told the Daily Mail that his side are showing their "character" after their second shootout win of the tournament.
"Our style was cramped a bit and maybe we did not want to risk with passes, so we had to balance it out in the second half," the Real Madrid man said. "We dominated in extra time and were the better team, we should have finished the job before penalties - but maybe it is written in the stars that we had to go through the extra drama.
"We had players go down injured, we hit the woodwork, had chances but did not convert them. After we went 2-1 ahead, we should have maintained our focus, but there was a lapse of concentration.
"At certain moments we lacked power, but we have played two matches of 120 minutes of football in six days, and of course this will leave a mark on you and you have to pay the toll for such exertions. Thank God we have shown our character."
Croatia's semi-final appearance is only their second in the nation's history following their run at the 1998 World Cup in France.