Getting a hard money loan with bad credit may be easier than getting a standard loan from a bank. It really depends on the individual situation and the lender. Most banks have raised the minimum required credit score for personal loans. If your score is low, you may still be able to get a mortgage for your primary dwelling from a regular bank, but if you are interested in real estate investing, rehabbing or flipping, your application will probably be denied.
For some hard money lenders bad credit is not an issue. It is their business. Some small companies and private individuals specialize in making high risk loans to property owners. The amount that a person can borrow is limited to the amount that the lender can expect to recoup in the case of foreclosure. These are risky deals for both the lender and the borrower, but sometimes it is the only option.
The best advice is to look at your situation carefully. Don’t be overly discouraged by low credit scores, but don’t go around putting in applications at every bank in town. Numerous denied applications will drive you score even lower. It makes you look desperate.
If you have been denied credit based on a low score, you are entitled to a free copy of your credit report. Get it. Check it carefully. There may be inaccurate, old or false information. Even correcting a bad address can add a couple of points to your score. Some people search for a hard money loan with bad credit, because they think that they have no choice. Correcting information on your credit report is the best choice, particularly if you want to invest in real estate, now or at some point in the future.
For real estate investors seeking hard money lenders bad credit scores are not ideal, but private lenders are more likely to take other things into consideration. For example, perhaps you have some experience in flipping properties, but for some reason you credit history is less than perfect. You could have been a victim of identity theft or a difficult divorce. Maybe you have a recent history of making payments on time and repaying promptly, but late payments from years past are still affecting your overall FICO numbers. Once you know it’s there, it may take you months to get the credit bureaus to remove that old information. Those months could cause you to miss out on a good opportunity.
If you explain your situation to the hard money lenders bad credit issues might not prevent you from cashing in on that great deal. Bankers, on the other hand, typically make their final decisions based on the numbers, even though we all know that they are not always an accurate reflection of a person’s creditworthiness. It is that fault in the system that creates one niche for the private lender.
Providing solutions for people with problematic credit is not the only gap filled by private lenders. In fact, it is not even the most common reason that people look for this type of financing. There are advantages to real estate rehabbers that have to do with the time it takes to close, the amount available for the loan and what it can be used for. Both banks and private lenders have different requirements. Even private lenders may take a look at your credit score. Some may require a higher score than others
So, to get a hard money loan with bad credit, you may need to look around until you find the right lender. You may even need to wait a little while or make the effort to correct inaccurate or old information that is still lingering on your credit report. In other words, it may take a little doing, but don’t give up before you even try.