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How to Get a Mortgage with Bad Credit Score

Purchasing a new house in today’s market can be a real challenge for people with a bad credit score.

Posted: 15th October 2019 by Finance Monthly
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Unfortunately, a poor credit score can make renting in Edinburgh or other areas difficult. You can’t borrow your favorite property with bad credit.

The average Fico score varies between 300 and 850. A fair credit score is between 580 to 669, however even a score of 675 may not help you to get the best rates on traditional mortgages.

There is no need to worry because you can in fact qualify for a mortgage with a weak or average credit score. Some government programs offer VA and FHA loans. Furthermore, each state has special lenders providing home loans for poor credit.

Here are some tips to get a mortgage with a bad credit score

  • Work on your credit score by strictly following credit rules to raise your score.
  • Check eligibility for VA and FHA loans. The government guarantees allow you to get the advantage of relaxed eligibility.
  • Get ready for a sizeable down payment. Lenders will appreciate your efforts and offer reasonable rates. For this purpose, you can sell some items to increase your down payment.
  • Feel free to shop community banks and credit unions because big banks may offer different lending criteria. Credit unions can be a good option because they offer favourable terms.

Repair Bad Credit

Fortunately, you can work on your credit score over time. Before researching a house, you have to check your credit reports. In order to repair bad credit, you have to pay your utility bills before their due date and make sure to repay your loans as soon as possible.

Try to increase your credit score to almost 660. It will help you to drop a significant percentage of mortgage interest. Take necessary actions: pay your bills, decrease your balance, and avoid taking more credit. Before applying for a mortgage, you should examine credit reports further to find any discrepancies. Make sure you fix these as soon as possible.

Avoid Late Payments

In numerous cases, your poor payment habits can affect your bill payment. Remember, your payment history can affect your score. Try to improve on your bad habit of making late payments. By making timely payments, you will quickly improve your credit score.

Decrease Credit Utilization

Your debt will make up almost 30% of your FICO score. If you owe less than your capacity, you can improve your score. It is known as the rate of total credit utilization. Experts suggest managing your utilization on all cards under 30 percent. This figure is essential for credit reporting agencies.

Try to pay off your balance as soon as possible to improve your credit card statement. If you are unable to pay the whole balance before the closing date of the credit statement, try to decrease this amount as per your capacity.

If you are planning for a mortgage, avoid new credit because it will affect your credit score, but the right credit mix could help you raise your credit score to an optimal figure.

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