We all know that invest in real estate is a remarkable choice to secure our future financially. With numerous residential projects being offered at low-cost prices, it’s far no surprise that you would be tempted to own a brand new house. However, in case you haven’t maintained a good credit score history, you’ll be wondering how to deal with it. Your credit score comes into the picture in case you are planning to get a home loan to buy a new property. If you aren’t sure what a bad credit score means then we are able to provide you with a brief.
What is a bad credit score?
The credit score is a three digit number ranging between 300 to 850. However, for people who never took a loan earlier, their score may be 0 or 1. The scoring is done based on an individual’s past and present credit records and hence, for a person who never took a loan; the score might be zero. If you have a credit score above 650, your chances of getting a loan sanctioned will be more.
Don’t give up hope if you have not managed to get a high credit score. A poor credit score doesn’t always prevent you from making real estate investments. Keep aside your worries and read on to know how you can still consider purchasing a property with a low credit score.
Approaches to get away from bad credit score to invest in real estate:
Real estate partnership
Forming a real estate partnership with a trusted person is a good way of investing in real estate. If you can discover an investment partner with a good credit score, then you may use their credit score benefits to buy a property. In this case, the financial responsibility may be shared between you and your partner. Also, the profits will be shared by the partners as agreed. While getting into a real estate partnership, make certain that you prepare an agreement document reviewed and signed by both parties to avoid disputes in future. A real estate partnership will allow you to make large investments which can bring more returns in the future.
Find a co-signer for your loan
If your credit score is not satisfactory to get a loan sanctioned, then try to find a co-signer with a great credit score. It can be a relative or a friend who’s willing to act as a guarantor of your loan. Before availing the loan, make sure that you have the capability to pay the month-to-month loan EMIs. Failing to pay the loan installments will not only put you at risk but will also have an effect on your co-signer. If you’re paying the EMIs regularly without delays, then you can see that your credit score is improving gradually.
Real estate wholesaling
Real estate wholesaling is an alternative method to invest in real estate with a bad credit score. Real estate wholesaling includes a wholesaler contracting a property with a seller and then finding a suitable buyer who can purchase it for a higher price. The difference in price can be taken as a profit. Wholesaling is one of the best short-term investment strategies followed by real estate investor.
Ask for a lower personal loan amount
Asking for a high sum with a low credit score only shows more risk to the lender. From a lender’s point of view, those are signs that you can default on repayment. If you apply for a lower amount of a personal loan, a lender may feel comfortable granting the loan to you, as a lower amount is easier to repay.
Correct mistakes in your credit report
It is possible that your CIBIL record consists of errors. This is usually when the latest records hasn’t been updated against your record. Mistakes like those can take a toll to your credit score for no fault of yours. So, it is therefore necessary to review your CIBL report on a regular basis for free and correct them, if any. This will increase your credit score and make you a successful loan applicant.
Work on your credit score
While we hope that the above tips will help you start investing in real estate, we suggest that you work to boost your credit score in order to make potential successful investments. At reduced interest rates, having a higher credit score will make you eligible for a higher loan amount. So begin paying on time for your EMIs and credit card bills and wait for the results.