photo credit: laverrue

Getting a hard money loan with bad credit may be easier than getting a standard loan from a bank. It really depends on the individual situation and the lender. Most banks have raised the minimum required credit score for personal loans. If your score is low, you may still be able to get a mortgage for your primary dwelling from a regular bank, but if you are interested in real estate investing, rehabbing or flipping, your application will probably be denied.

For some hard money lenders bad credit is not an issue. It is their business. Some small companies and private individuals specialize in making high risk loans to property owners. The amount that a person can borrow is limited to the amount that the lender can expect to recoup in the case of foreclosure. These are risky deals for both the lender and the borrower, but sometimes it is the only option.

The best advice is to look at your situation carefully. Don’t be overly discouraged by low credit scores, but don’t go around putting in applications at every bank in town. Numerous denied applications will drive you score even lower. It makes you look desperate.

If you have been denied credit based on a low score, you are entitled to a free copy of your credit report. Get it. Check it carefully. There may be inaccurate, old or false information. Even correcting a bad address can add a couple of points to your score. Some people search for a hard money loan with bad credit, because they think that they have no choice. Correcting information on your credit report is the best choice, particularly if you want to invest in real estate, now or at some point in the future.

For real estate investors seeking hard money lenders bad credit scores are not ideal, but private lenders are more likely to take other things into consideration. For example, perhaps you have some experience in flipping properties, but for some reason you credit history is less than perfect. You could have been a victim of identity theft or a difficult divorce. Maybe you have a recent history of making payments on time and repaying promptly, but late payments from years past are still affecting your overall FICO numbers. Once you know it’s there, it may take you months to get the credit bureaus to remove that old information. Those months could cause you to miss out on a good opportunity.

If you explain your situation to the hard money lenders bad credit issues might not prevent you from cashing in on that great deal. Bankers, on the other hand, typically make their final decisions based on the numbers, even though we all know that they are not always an accurate reflection of a person’s creditworthiness. It is that fault in the system that creates one niche for the private lender.

Providing solutions for people with problematic credit is not the only gap filled by private lenders. In fact, it is not even the most common reason that people look for this type of financing. There are advantages to real estate rehabbers that have to do with the time it takes to close, the amount available for the loan and what it can be used for. Both banks and private lenders have different requirements. Even private lenders may take a look at your credit score. Some may require a higher score than others

So, to get a hard money loan with bad credit, you may need to look around until you find the right lender. You may even need to wait a little while or make the effort to correct inaccurate or old information that is still lingering on your credit report. In other words, it may take a little doing, but don’t give up before you even try.

James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Lending, a comprehensive resource for those looking to secure funding for real estate projects.

photo credit: rednuht

TLoans are the single most common source of funding, whether for purchasing a home, financing a business, paying off debt, or financing a college education. Before approaching a lender to see if you qualify for a loan, whether your credit scores are ideal or very poor, it’s a good idea to understand as much as you can about the factors that a lender will take into consideration when evaluating your situation and your position as a borrower. Qualifying for a loan can be much easier when you have and understand all of these factors.

To qualify for a loan, a bank or other lender will examine a few key points about you.

1. Ability to repay the loan.

First and foremost, when qualifying for a loan, a lender needs to be reassured that you have the ability to repay the money that is borrowed, and that you are trustworthy enough to make your payments. Lenders want to see your cash flow and if possible, a secondary resource, such as collateral. Your credit scores help them determine if you’ve paid off credit cards and other loans. Lenders check your credit scores to see if you’ve made your payments on time, and to see if you’ve defaulted any creditors. If you’re applying for a business loan, lenders like to see a business that’s been in existence for a long time, and that it’s been profitable for a long time. Qualifying for a personal loan or a mortgage is much the same. If you have a credit history that shows that you’ve paid your other bills, and you have a steady flow of income coming into your budget, chances are good that the loan will be approved. If your credit is questionable, however, it may be of benefit to seek a lender specializing in loans for individuals with poor credit.

2. Credit history.

As mentioned, the first thing that a lender will do to determine if an individual, couple, or business can qualify for a loan is to pull their credit report, usually from Experian, Equifax, Transunion, or another smaller credit bureau. Therefore, before you approach a lender, or even start preparing to request a loan and see if you qualify for a loan, make sure your credit scores are as high as possible. Get a copy of your credit report from each of these three credit bureaus. Review each item on the report carefully, and report any errors that you find. For example, if you’ve gone through a divorce and a loan was placed in your spouse’s name, request that that item be removed from your report to not reflect the current history of that particular loan. Watch for items that may not be yours, too. Identity theft and identity errors are common, and it’s important to protect your credit and remove anything that simply does not belong on your report. Once a dispute is filed, the creditor has 30 days to respond to the credit bureau. If no response is received, the item must be removed from your credit report, and your credit scores will increase. Check your name, social security number, and address at the top of each report to make sure they are correct. Contact each individual credit bureau with questions and disputes before determining if you qualify for a loan.

Qualifying for a loan can also be a matter of being honest, regardless of credit scores. If your credit scores dropped due to a divorce, medical crisis, or job loss, and those issues have been resolved, you can still easily qualify for a loan by explaining these events to the lender. Bad things happen to good people, so be honest and explain and detail these issues in writing, and submit that information along with your loan application to determine if you qualify for a loan.

3. Equity.

Lenders often ask for equity when qualifying for a loan, especially if the loan amount is large, such as to construct a new building for business or purchase a home. In these instances, the building or home itself can be the collateral, and equity is built by offering the lender a down payment. To qualify for a loan, be prepared to offer equity, either with a down payment or some type of collateral.

If your credit scores are high, and if you’ve never had any financial difficulties, qualifying for a loan should be a fairly simple process. If you’ve had financial challenges or extreme financial difficulties in the past, be prepared to offer explanation of these problems to the lender when finding out if you qualify for a loan. Seek out a lender specializing in poor credit loans if your credit scores are too low for a conventional loan. You may find that by seeking these lenders, you’ll easily qualify for a loan.

Regardless of your credit scores, always make sure that the loan payments fit into your current personal or business budget easily, and do this before determining if you qualify for a loan. Not making payments on time can result in adverse marks on your credit reports, reducing your credit scores and making it difficult to obtain future loans.

Rebecca Game is the founder of Digital Women ®, an online community for women in business. A 30 year entrepreneur and dedicated to helping other women find small business loans. Visit her site: Loans for Women

http://www.digital-women.com