It is very rare for people to
always be granted loans. Even those with average credit are still getting
denied by banks and other lending institutions. One might even say that it is
part of the experiences of growing up. Money doesn’t grow on trees as they say.
Why should it be handed out to you that easily?
For those whose names have been
marred with a history of bad credit, however, the implications of the rejection
are far more severe. Given that they already have a red flag waving over their
profiles, the big concern is that they may not get the money they need. The
good news is that they can still get a loan despite that bad financial record.
They can still show the lenders that they deserve a second chance.
In order to secure a loan, the
first thing you should do is to secure all required documents. This is the most
basic thing you have to accomplish. Don’t even think about covering up the
facts by lying. The lenders will be running a background check on you anyway.
If you lie and get caught, then you certainly won’t get that loan approval.
Lenders build their business on trust. If they can’t trust you, they wouldn’t want
to do business with you. It’s as simple as that.
That’s just the tip of the iceberg,
though. Let’s say, for example, you would like to take out a mortgage. However,
you’re worried that your application will be shot down on account of your
credit history. Here are some more tips that you can use to get that loan
despite having bad credit.
1. Be informed about your credit rating – Some people automatically
assume that they have a less than ideal credit score. It can be because they
previously had a bad experience, or they’re just not sure if their profile fits
the kind of loan they are eyeing. However, the truth is that there is a cap as
to what is likely to be a bad credit rating.
If you have a score of 620, then
that is incontestably a bad rating. If, however, you get something just a
little above 620, that’s a little bit more manageable. It’s still not in the
safe zone, but at least it’s not so bad as to keep you from actually taking out
a mortgage. That is why it is important for you to get your credit report.
Knowing just how much you owe should give you a credible strategy for taking out
a mortgage
loan with a bad credit history. Aside from that, it should also “alert
buyers to any credit errors that should be remedied before making any
application for a pre-approval or mortgage application.”
2. Don’t dwell on the bad, highlight the good – What this simply
means is that you should focus on your other assets. Of course, it’s not to say
that you should cover up your bad history with credit. As mentioned above,
that’s just going to work against you. Instead, you can put front and center
other financial assets. It can be an impressive insurance account, or even a
retirement package. While you may not necessarily be liquid at this point, at
least there are things for you to look forward to.
3. Show good faith by offering a large down payment - The other
thing you must do to secure a loan with bad credit is to project the image that
you are in this deal for the long haul. While it may seem like giving out a
large sum for down payment is counter-intuitive, it will definitely show the
lenders you are invested in the property.
By paying a larger sum upfront, it
also puts the lenders at ease because it minimizes the risk for their part.
This in turn could help you nab that much-needed loan to fund your needs. Of
course, the problem then turns to coming up with that down payment. You might consider selling a prize possession,
or saving your money. Some states, cities and municipalities also have programs
that may be able to aid you with a down payment.
4. Make a practical choice – Understandably, you want to get a nice
home to move into with your family. Then again, you also have to be realistic
about your situation. If you do have a rather ugly credit standing, then don’t
even think about getting something that is way out of your budget. Otherwise,
you’ll only perpetuate the cycle of having bad credit. It’s not a place you
would want to be stuck in at all.
Take a good, hard look at the kind
of house you want and its amount. Then figure out how much you can afford to
spend. Keep in mind that having bad credit will mean the mortgage will carry a
higher interest rate. It’s not exactly fun, but it’s what you’ll have to deal
with as a consequence of your record.
Despite that, however, what is most
important is that your chances of getting mortgage financing with bad credit is
still pretty good. It’s definitely going to take a lot of hard work on your
part. You will have to do a lot of convincing, too, so that you can get your
loan approved. But as many other people with bad records have proven, having a
red flag on your credit record can be overcome. It’s going to make things a lot
harder for you, but it does not have to be something that should permanently
incapacitate your loaning capabilities.
Feel free to join the discussion on
the matter, or share your insights and comments below.
Author Bio:
Amy Johnson is
an active blogger who is fond of sharing interesting finance related articles
to encourage people to manage and protect their finances. She also covers
topics on how to identify
credit card fraud that can help people protect their
credit from credit scams.
Very informative! My husband and I are planning to get a new house but I've always thought it will be very difficult to get a mortgage because I had a bad credit. Good to know that there is a way around it.
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