Racking up a bad credit rating can be potentially harmful for your credit history and may cause issues when you want a home loan. Don’t stress just yet, there are options for people with bad credit history.
There are lenders out there that offer loan products specifically designed for people with a bad credit history. These specialist lenders usually offer what is called a non-conforming loan. This is a type of loan that is usually offered not only to those with bad credit but people with unusual circumstances that the main lenders won’t lend too.
If you’re still having trouble getting approved for a home loan, then you may have to tackle your credit problem head-on. One of the ways you can do this is by settling all your outstanding debts before anything else. Focus on your credit card debts since they generally have high interest rates.
You should also speak with your mortgage broker straight away as the sooner you get onto getting your finances sorted will help you in the long run. If you have equity in your property a strategy may be to consolidate your loans into one against your house to attract a lower interest rate. This will help you pay off your loans quicker as the interest rate is lower.
While you’re in the process of shopping for loans, avoid making too many applications at one time as lenders might see it as a sign that you’re having credit troubles, especially if you already have a bad credit history. To avoid this, it is best that you speak with a mortgage broker first who can help compare loans for you, which minimises the number of applications you need to make.
How to Avoid a Bad Credit History
You can of course avoid problems with your credit history even before you take out a home loan. One important thing you should remember is to obtain a free copy of your credit report from a credit reporting body. You may get your copy once a year. Doing so will help you keep track of your credit health and correct any issues with it prior to your loan application. This applies to problems such as unsettled debts and erroneous entries.
Finding a Home Loan for Your Situation
Mortgage brokers can be invaluable if you’re looking for a home loan when you have a bad credit history. They will assess your situation and ask you about your specific needs so that they can compare and recommend loans that will truly suit you.