Commercial & Consumer Finance Services

Many potential home buyers want to know how to get a home loan with bad credit. Getting a home loan can be very challenging if you have less than perfect credit. The truth is many lenders and mortgage companies are turning away all customers with low credit scores or other credit issues. There are some home loan options available if you have damaged credit. Here are some strategies for how to get a home loan with bad credit:

1. Increase your down payment. A larger down payment can mean the difference between approval and denial for many home buyers suffering from damaged credit. If you increase your down payment to 20% or 25% you can likely get approved for a home loan even if you have bad credit. Lenders see a larger down payment as a sign of security and your investment in the home. A low down payment means you are much less invested and therefore more likely to walk away from the home if you suffer an economic setback. A larger down payment tells lenders that you are serious and committed to the home purchase. Try increasing your down payment if you have been turned down for a home loan.

2. Pay down debts. Your debt to income ratio is a statistic that lenders use to gauge your financial ability to repay the loan. If you have large amounts of debt including credit cards, student loans and auto loans you may need to pay down some of those debts in order to obtain a home loan. Start by paying off smaller items and work your way up to the larger debts. Each item that is paid off will improve your debt to income ratio and that will increase your chances of getting approved for a home loan. A lower debt to income ratio will also increase the overall amount of your home loan because it will show lenders that you have more disposable income that can be used to repay the home loan.

3. Check your credit report for inaccurate items or other discrepancies. If you haven’t checked your credit report lately you may be in for a surprise. There can be inaccurate items on your credit report that will decrease your credit score and lower your chances for obtaining a home loan approval. If you see inaccurate items you should report them immediately to the 3 major credit bureaus.

4. Consider private financing, owner financing or rent to own housing if you are unable to qualify for a home loan right now. Private financing, owner financing and rent to own housing can be a great bridge between regular home rentals and home ownership. That bridge can give you the time to build up an on-time payment history, a larger down payment and a better credit score. There are many home owners that are willing to provide temporary owner financing if you can show them that you are in a good position to make on-time payments. Consider this option if you have exhausted your home loan options without any home loan approval.

If you are searching for a business loan you may want to check your business credit status first. Many business owners fail to realize that their business has a credit score and profile just like all individuals. Business credit is generally reported through Dun and Bradstreet at http://www.dandb.com. Most larger companies will report the payment history of their business customers through Dun and Bradstreet. As a business owner you can check your business credit history and credit score through a variety of programs offered by Dun and Bradstreet. You should monitor your business credit report for accuracy and promptly report any inaccurate items.

How do you improve your business credit score?

1. Pay all business bills timely. Pay early if you can. Many businesses pay in a 30-60 day  timeframe. If you establish a history of paying in less than 30 days your business credit will be rewarded.

2. Get business credit accounts. There are several ways to do this including business loans, business lines of credit, merchant advances, or business credit cards. One of the easier options is to establish a trade line of credit with your business suppliers. This can include large suppliers like Staples (http://www.staples.com), Office Depot (http://www.officedepot.com), Home Depot (http://www.homedepot.com) and Lowes (http://www.lowes.com). These suppliers offer business credit accounts and they will report your payment history to Dun and Bradstreet. You can also try to open a business credit account through most of the major cell phone carriers.

You may be required to use your personal credit in order to qualify for a business credit account especially if your business is new or unestablished. Once you have the first business credit account you should be able to open additional business credit accounts within 6 months to a year.

There is a lot of talk about credit scores and how to monitor and manage them. The sad truth is many consumers and business owners often overlook the importance of monitoring their credit reports and managing the data contained within them. Your credit score is a 3 digit score that is used by most lenders and creditors to determine your credit-worthiness. Failure to monitor and manage your credit report can be very harmful to your credit score. Your credit score represents your credit history in obtaining credit and repaying the credit you have obtained. If you have not properly managed your credit in the past you can still get started today. Here are a few simple steps that you can take to get your credit report and credit score under control.

1. Get a copy of your free annual credit report. You can obtain a free annual credit report at https://www.annualcreditreport.com/index.action

2. Review your free annual credit reports to determine if there are any inaccurate items. You can report inaccurate items within the free annual credit report system. Additional steps may be required including writing an official letter of dispute. Follow all instructions on the free annual credit report site to complete a dispute of any incorrect items. Incorrect items can include late payments, charge-off accounts or credit that you did not apply for. If you see any items that appear inaccurate you should take immediate action to get it corrected with the credit bureaus.

3. Your free annual credit report does not include your actual credit score. You can pay a small additional fee through the free annual credit report site to obtain your credit scores.

4. Continue monitoring your credit report every year to make sure there are no additional inaccurate items. Your credit report should only show items that you authorized.

5. Use credit cautiously – do not apply for loans or other forms of credit if you are unsure about using them. Every time you apply for credit it results in an inquiry on your credit report. Too many credit inquiries can result in a lower credit score. The best approach; only apply for credit if you truly need it and do not over-apply for credit.

6. Manage your credit wisely – always pay your bills on time. On time bill payment is the key to improving your credit score. If you pay your creditors on time it will be reported as a favorable item on your credit report. If you cannot pay your creditors on time you should contact them promptly to discuss payment plan options. Good communication with your creditors can prevent a negative credit item on your credit report.

Following these steps can be the difference between a good credit score and a bad credit score.