We all know the banks and mortgage companies are being far more cautious about lending money these days. They seem to only want to lend to those who do not need it.
If you are looking to get a loan or a mortgage but your credit score is not high enough to qualify, this can be a real problem. So what are your options?
1. Work to boost your credit score.
Your credit score is made up of five metrics.
Payment history counts for 35 percent, the amount you owe makes up 30 percent, the length of time you have had credit is 15 percent and the types of credit you have and how recent they are each counts for 10 percent.
By improving any of these metrics, you can boost your overall score. Working to reduce the amount you owe is perhaps the easiest to fix.
Also, when working to boost your credit score, remember to not apply for too many new credit cards. This can negatively impact your score.
2. Talk directly to the lender.
This works best when you are applying for a specific purchase, say for a car or a living room set. The person who you speak with needs to be a decision-maker, or at least able to influence the decision to give you a loan.
Often a loan rep will explain the reasons you are having difficulty, allowing you an opportunity to potentially fix the situation.
Sometimes simply presenting yourself as a conscientious borrower is enough.
“Explain your situation honestly
and ask what you can do.”
3. Consider an FHA mortgage.
If you are trying to get a mortgage loan, a government-guaranteed FHA loan may be right for you. The credit requirements are less strict and the down payment amount is lower.
Lenders are less worried about you credit score with an FHA loan because they will get the money back even if you default.
4. Find a co-signer.
If your credit score is bad enough that you just can’t get a loan on your own, try asking someone with a good credit history to co-sign for you. Be careful with this tactic, as their credit is now on the line if you do not make the payments.
Depending on the purchase and the terms, having a co-signer for just long enough to re-establish your credit may allow you to refinance and remove them after a period of time.
5. Wait it out.
When all else fails, it may just be you simply have to wait for your credit score to improve. Of course, this does not mean waiting passively.
You should strive to pay down your debt, make every payment on time, use your credit cards sparingly and do not open new credit cards.
Your credit score tells a lender about your risk as a borrower and how likely you are to repay a loan. The lower your score, the less likely they are to trust you with their money.
By making an effort to improve your credit score and show a good credit history, you will be more attractive to a lender. Won’t that feel nice for a change?
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