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How to Invest in Real Estate with a Bad Credit Score?

Posted by Balaji on October 16, 2020

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.

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