There is nothing worse for an individual who seeks to buy a home than to discover their credit rating has been labelled ‘poor’ or ‘bad’. Trying to get a loan can be very difficult if past credit issues exist; difficult, but not always impossible. A poor credit score can result from credit activities that are considered ‘bad’, such as missing payments on bills or credit cards, or previous debts left unsettled. Poor financial decisions and personal/family problems can negatively influence a persons’ credit history and are common factors that lead to a poor credit score. If this is your current dilemma, there are a couple of choices. You could wait and ensure that no ‘negative’ activity occurs on your credit file; make sure you are paying bills on time, settle unpaid debts, pay your credit cards by the due date. These actions improve credit health. Banks have very strict servicing guidelines, making it unlikely that you will gain an offer of finance from them until every credit issue is cleared. While clearing your poor credit history will open-up lending options, time may not allow this if your situation is urgent, and there are a few options for lending if you have existing bad credit.
Firstly, it may be helpful to know that going down the ‘Bad Credit Home Loan’ path will involve baggage; higher interest rate, lower property value. However, some lenders may bypass traditional credit assessment processes, instead focusing on the borrowers’ ability to service the new lending without causing a hardship situation. These lenders, called “Specialist Lenders”, conduct deeper analysis during the assessment process and approach situations on a case-by-case basis. Specialist Lenders take into account the explanation and reasoning behind an applicants’ poor credit score; the details being of greater importance than the credit score itself.
Specialist Lenders do not necessarily differ much from the standard lenders regarding credit worthiness or assessment, except in that there is potentially greater risk carried by lenders who finance borrowers considered to have ‘Poor Credit’.
Providing a valid and robust plan to demonstrate how you intend to address past credit issues strengthens your application case. Consolidating debt and reducing limits on credit cards have a direct impact on improving cash flow and are examples of actions that may be viewed in a positive light by specialist lenders. Demonstrating to a specialist lender how attaining the new lending will substantially improve your financial position can be a real game-changer for you in your quest for a home loan approval. Even with a poor credit score.
It can be uncomfortable discussing the situations that have contributed to a poor credit score, however putting in the effort to approach specialist lenders can help you on your quest for home loan approval – and remember, they are used to dealing with clients who have experienced the same hardships and challenges.