If you have no credit or bad credit, home ownership may feel unattainable. Many lenders don’t work with clients who have low credit scores, and often the deals that are offered are less than appealing.
Worried about applying for a home loan because you don’t have the right credit or have been told ‘no’ before? Here are four things that might put your mind at ease.
Bad credit is temporary!
A common myth is that marks from late and missed payments, bankruptcy and rejected credit applications stay on your score forever. This is simply untrue. Defaults and judgements remain on your credit score for five years, and bankruptcies remain for seven.
There’s a lot you can do to improve your credit score. Build good credit by paying off old debts and making sure to always pay bills on time. If there are mistakes on your score, consult the agency to have them removed.
Think long term
If you don’t have great credit, your finance options will be more limited than someone with a perfect Vedascore. Any mortgage company or lender that tells you otherwise is just trying to get your money.
Fewer options doesn’t mean, however, that there isn’t a great loan out there for you. You might just need to pay more at first to prove you’re responsible. Bad credit home loans often have higher interest rates for the first five years and then level off.
Lenders are becoming more understanding
Banks used to take a much harsher approach to bad credit lending. Today, you have more of an opportunity to explain your financial situation and lenders are more understanding of things like medical bills or student loans.
Lenders will also look at the age of the defaults and whether you’ve made an attempt to remedy them. If you’ve made regular payments on your massive student loan, that looks better than no attempt to eliminate or lessen the debt.
You can find the right lenders
People with bad credit need to look around a bit more for the right home loan. But did you know that shopping around too much can make your credit worse? Every rejection negatively impacts your score, so hire a broker to investigate the best options for you.
At Redrock, we know a few bad marks doesn’t mean you won’t be able to make your mortgage repayments. We want to see all of our clients realise their dreams of owning a home, so we specialise in helping our clients find suitable bad credit home loans