Home or mortgage loan while having bad credit score
- Thread starter david63
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Have you considered using private money? You can repair you credit rating in a few months. Understanding your credit rating is very important as well:
There are five components that make up your credit score
1. Payment history: 35 per cent
“The biggest component in delivering a score is the payment history of that consumer,” Le Fevre explains. “So that includes: is everything paid on time? Has there been a late payment or periodic late payments?” The payment rating “matrix” ranges from zero to nine, with zero being a brand new account. If you pay within 30 days of the due date, you get an “R1.” If you’re under 30 days late, that information may not reach Equifax. You move down to an “R2,” though, if you’re between 30 to 60 days past due. At the 120 days-past due mark, you drop to an “R5.” You don’t ever want to reach that point. It continues downhill from there until you reach “R9” and the account is closed for non-payment. What you may not know: cell phone information is also fair game. “It takes that information, i.e. how you’re paying on your cellphone account into play, along with your credit card, your installment loan, your car lease, your line of credit and your mortgage. It all comes into play.”
2. Utilization: 30 per cent
“Another big thing is how close your balance is to your limit,” says Edmonton mortgage broker Natalie Wellings, who deals with people’s credit ratings on a daily basis. “If you are close to your limit, your credit score drops. So whether your limit is $500 or $5,000, when you are close to your limit, it drops your score.”
3. History: 15 per cent
This one is simple: the longer you have an account (like a credit card or line of credit), and keep up the good behavior — i.e. no late payments — the better your rating will be.
4. Credit product type: 10 per cent
Different types of credit carry different kinds of weight. “You look at a mortgage,” Le Fevre explains, “every month, the amount owed will come down because of the payments being made.”
Whereas, you can quickly max out a credit card or rack up a massive cellphone bill on any given day. So there’s more risk involved, at least from a credit rating standpoint.
5. The “inquiry” section: 10 per cent
You may have heard that each time your credit is checked, your score drops a little lower. Well, that’s true, but not to the extent that you may think. When you’re shopping around for a mortgage, there’s the notion that going to a mortgage broker is better than several banks in part because the broker will only check your credit once and apply to multiple lenders. According to Le Fevre, you don’t have to be afraid to shop around. “When you’re applying for a car loan or a mortgage, the system recognizes that you may be…going to multiple locations.”
“Those inquiries are ‘de-duped’ — each one is posted individually, because we must under credit card reporting legislation. But they only count as one inquiry from a scoring perspective.” How long will your credit mistakes haunt you?
Hope this helps.
There are five components that make up your credit score
1. Payment history: 35 per cent
“The biggest component in delivering a score is the payment history of that consumer,” Le Fevre explains. “So that includes: is everything paid on time? Has there been a late payment or periodic late payments?” The payment rating “matrix” ranges from zero to nine, with zero being a brand new account. If you pay within 30 days of the due date, you get an “R1.” If you’re under 30 days late, that information may not reach Equifax. You move down to an “R2,” though, if you’re between 30 to 60 days past due. At the 120 days-past due mark, you drop to an “R5.” You don’t ever want to reach that point. It continues downhill from there until you reach “R9” and the account is closed for non-payment. What you may not know: cell phone information is also fair game. “It takes that information, i.e. how you’re paying on your cellphone account into play, along with your credit card, your installment loan, your car lease, your line of credit and your mortgage. It all comes into play.”
2. Utilization: 30 per cent
“Another big thing is how close your balance is to your limit,” says Edmonton mortgage broker Natalie Wellings, who deals with people’s credit ratings on a daily basis. “If you are close to your limit, your credit score drops. So whether your limit is $500 or $5,000, when you are close to your limit, it drops your score.”
3. History: 15 per cent
This one is simple: the longer you have an account (like a credit card or line of credit), and keep up the good behavior — i.e. no late payments — the better your rating will be.
4. Credit product type: 10 per cent
Different types of credit carry different kinds of weight. “You look at a mortgage,” Le Fevre explains, “every month, the amount owed will come down because of the payments being made.”
Whereas, you can quickly max out a credit card or rack up a massive cellphone bill on any given day. So there’s more risk involved, at least from a credit rating standpoint.
5. The “inquiry” section: 10 per cent
You may have heard that each time your credit is checked, your score drops a little lower. Well, that’s true, but not to the extent that you may think. When you’re shopping around for a mortgage, there’s the notion that going to a mortgage broker is better than several banks in part because the broker will only check your credit once and apply to multiple lenders. According to Le Fevre, you don’t have to be afraid to shop around. “When you’re applying for a car loan or a mortgage, the system recognizes that you may be…going to multiple locations.”
“Those inquiries are ‘de-duped’ — each one is posted individually, because we must under credit card reporting legislation. But they only count as one inquiry from a scoring perspective.” How long will your credit mistakes haunt you?
- Pay your bills on time
- Don't go over your credit limit
- Avoid numerous hits to your credit report ie: shopping for a car, dealerships will request your credit report. If you go to 2 dealerships in one day that is 2 hits to your report and does not look good.
Hope this helps.
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Access to cheap credit is vital for real estate investors.
If you have bad credit it’s a sign of bad past behaviour that has to be cleaned up first. Focus on that - such as those steps listed by Tina - then buy real estate.
Of course you can get private money but they will also check your credit score and the lower the score the more expensive the money and the lower the LTV (loan to value).
Real estate with expensive money ( say 8% or higher) is almost always a bad idea.
Sent from my iPhone using myREINspace
If you have bad credit it’s a sign of bad past behaviour that has to be cleaned up first. Focus on that - such as those steps listed by Tina - then buy real estate.
Of course you can get private money but they will also check your credit score and the lower the score the more expensive the money and the lower the LTV (loan to value).
Real estate with expensive money ( say 8% or higher) is almost always a bad idea.
Sent from my iPhone using myREINspace
I had a shaky credit score but managed to secure a mortgage through a credit union. They're often more flexible and understanding. Do some research, talk to a mortgage advisor(like Mortgage Advisor Sunderland), and explore your options. It's not always a dead end. Best of luck!
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