My credit score is around 500, is there anything that can be done with this low of a credit score? Can I buy a home? Can I refinance my home with bad credit? These are some very typical questions that are asked by consumers with low credit scores or bad credit. Yes there are many options for consumers with scores in the low 500s. There are even mortgage programs for people with scores below 500 but they are harder to find and qualify for.
Your options are limited with scores at this level. Hard money programs are usually not FICO driven but rely heavily on the ratio of the loan amount over the fair market value of the property.
If your credit score is around 500 realize that it is much lower than most other peoples. You probably know why your score is low and should try to improve in these areas. Try to make your payments on time and pay down your debts. Once you improve your credit score it will be easier for you to obtain a loan.
If you have a strong mortgage or rental history, there are many options available for you.
If your FICO score is around 500, it is extemely important to keep it from going below 500. When your credit score falls below 500, your options become dramatically limited, however we do still have options to assist you in getting caught up and improving your credit score.
Borrowers can still qualify for home loans with low credit scores. However, since it is a higher risk for lenders, these will usually carry higher interest rates and lower loan to value ratios.
If your credit scores are that low it may be an option to use a co-singer or coborrower with better scores to help you qualify for a loan.
If you can get someone with a high credit score to add you onto thier credit card as a co-signer, your score will increase.
Another option is to investigate mortgage programs that are not credit score-driven. Many lenders offer mortgage-only or rent-only loan programs where only your housing history payments are considered (mortgage or rent). These loan programs offer the opportunity to avoid having your credit score impact the approval of your loan, but they will usually carry a higher interest rate or require more down payment in order to qualify.
This is another reason why it is essential to partner with a good mortgage professional who can review all of your options and work with you to determine the best scenario for you and your family.
You also should consult with your mortgage professional to review your credit report and see if it contains any errors. In some cases, if you can document the mistakes, you can have errors removed and have your credit score redone. This may move your score up enough to give you more options in loan programs.
Correcting credit report errors can often be a long and labor intensive process. Be sure to keep any documentation from your creditors that prove the entry is an error. The three credit bureaus will usually demand to see the proper paperwork prior to removing or updating any trade line.
Sometimes, a 500 credit score borrower can qualify for a "land contract buyout" loan. They must first have a valid land contract (AKA contract for deed), and pay on the home for 12 months. If the borrower keeps all the cancelled checks, and pays on time, there is a good possibility of "refinancing" the land contract to get the homeowner qualified. See a reputable mortgage broker for more details.
Make sure you work with a lender that uses "rapid rescore" to help their clients. This can help you get the fico score you need to qualify.