Applying for Hard Money Financing With Low Credit Score? Here is Everything You Need to Know — Part 1
As a real estate investor, you will need funds time to time. If you’ve decided to seek funds from a traditional lending agency or a bank, your credit score will play a decisive role in the loan approval process.
Why does credit score matter so much to banks? Read on to find out:
What Is A Credit Score?
A credit score is one of the most significant financial numbers. Simply put, it reflects your financial worthiness. In other words, it allows lenders to evaluate your capacity to repay your loan in a timely manner.
Your credit report has your credit score. You can request a copy of your report from TransUnion, Equifax, and Experian – the main credit bureaus. These credit agencies follow different models for calculating credit score. However, they use the following factors for establishing your credit score:
Previous debt repayment history (prompt repayment will result in a good credit score)
Current debt level (How much debt you currently owe to lenders)
How long your credit accounts have been used
How often you have applied for new credit recently
Types of credit you have
As mentioned earlier, having a good credit score will make you more attractive to lenders. This is because a credit score determines two important things:
It will increase your chances of getting approved for a loan. Banks and traditional lenders prefer to give out loans to reliable borrowers with a good credit score. Maintaining a high credit score will make the loan approval process easier.
It will determine the sort terms and rates you are likely to get. The better your credit score, the better loan rates and terms you can expect from a bank.
Generally speaking, banks and lenders have set their own minimum and maximum credit score requirements to acquire a loan. In order to acquire a bank loan, it’s important that you have a high credit score. But, banks and traditional lenders will also look at other details in your loan application, such as your how much funds you need for real estate investment, your income, and more. These factors will help them determine whether to approve or reject your request for real estate financing.
Many of us know that credit score affects the granting of a bank loan, what about alternative financing like hard money loans? Hard money loan is a short-term loan offered by private lenders to real estate investors. What are the requirements for hard money? Will your credit score influence your loan request? Stay tuned to get the answer.