{"id":88171,"date":"2019-04-07T05:00:52","date_gmt":"2019-04-07T11:00:52","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=88171"},"modified":"2024-02-24T11:49:39","modified_gmt":"2024-02-24T18:49:39","slug":"does-credit-score-matter","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/does-credit-score-matter","title":{"rendered":"Does Your Credit Score Matter When You Invest in Real Estate?"},"content":{"rendered":"<p>Rental property is typically the first type of real estate that a new investor looks at when trying to build wealth and diversify a portfolio. But many get discouraged when they realize their credit score doesn\u2019t exactly qualify as \u201cexcellent.\u201d<\/p>\n<p>If your credit score is low, does that mean you can\u2019t invest in real estate?<\/p>\n<h2>Your Credit Score and Real Estate Investing<\/h2>\n<p>Your credit score is a number on a scale. A low number tells potential lenders that you\u2019re a risky borrower, and a high number assures them you\u2019re responsible.<\/p>\n<p>According to Credit.com, there are five credit tiers:<\/p>\n<ul>\n<li>Bad credit: Below 600<\/li>\n<li>Poor credit: 600-649<\/li>\n<li>Fair credit: 650-699<\/li>\n<li>Good credit: 700-749<\/li>\n<li>Excellent credit: 750+<\/li>\n<\/ul>\n<p>If you try to finance a rental property through a traditional lending avenue such as a bank or credit union, your credit score is one of the primary factors they will look at. Unfortunately, this usually means people who have a low score are denied the loans they desire.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-85398 size-full\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/01\/marketing-presentation.jpg\" alt=\"marketing-presentation\" width=\"702\" height=\"335\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/01\/marketing-presentation.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/01\/marketing-presentation-300x143.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p>If you have bad or poor credit, loan denial is pretty likely. Even if you have fair credit, you\u2019ll probably get offered a high interest rate. What you need is good or excellent credit to obtain a rate that\u2019s competitive.<\/p>\n<p>If your score isn\u2019t quite where you\u2019d like it to be, and you have some time before you plan on applying for a loan, you can do some things in the meantime to boost your score.<\/p>\n<p>First, you can prove you\u2019re responsible by making all your current loan payments on time. If you have bad terms\u2014say, on a vehicle loan\u2014it may be tactically worthwhile to go ahead and refinance in order to get more favorable terms that will make it easier for you to stay on track.<\/p>\n<p>Other smart decisions include paying down balances ahead of schedule and quickly, making debt payments twice a month, and increasing your credit limit (and not spending any more).<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/credit-report-dos-donts\" target=\"_blank\">8 Important Credit Report Dos And Don\u2019ts When Qualifying for a Home Loan<\/a><\/em><\/p>\n<h2>Alternatives to Traditional Lending<\/h2>\n<p>Fortunately, your ability to invest in rental property doesn\u2019t rest solely on your credit score and traditional lending processes. It helps to have banks and credit unions available to you, of course, but there are other options.<\/p>\n<p>Take a look at a few of them:<\/p>\n<ul>\n<li><strong><em>Hard money lenders. <\/em><\/strong>Hard money lenders are simply individuals or groups that are willing to finance real estate deals on their own. They put up the cash and you commit to making payments to them, just as you would with any normal loan. <a href=\"https:\/\/www.biggerpockets.com\/blog\/hard-money-loan-ultimate-guide\" target=\"_blank\">The attractive thing about hard money lenders<\/a> is that they\u2019re more willing to accept unconventional deals and\/or work with people who have a bad credit score (so long as you can prove you\u2019re financially responsible in other areas of your life).<\/li>\n<li><em><strong>Online real estate lending. <\/strong><\/em>Over the past few years, a new practice has developed on the web. Somewhat like a crowdfunded investment, online real estate lending platforms enable private investors to pool their resources to fund a deal.<\/li>\n<\/ul>\n<p>You have to be more careful when you choose to work with hard money lenders or online investments, but it\u2019s good to know that other options exist for individuals who hope to invest in rental properties but have a credit score that is holding them back. It\u2019s likely that even more alternative lending opportunities will emerge in the coming years.<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/becoming-a-landlord-the-easy-way\" target=\"_blank\">How I Went From $0 Net Worth to Qualifying for $1M in Real Estate Financing in 2.5 Years<\/a><\/em><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-81272\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/10\/credit-card-real-estate.jpg\" alt=\"credit-card-real-estate\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h2>Always Get a Second Opinion<\/h2>\n<p>When it comes to something as significant as financing a piece of real property, you should get as much input as possible. One person might tell you to go in one direction; another could suggest taking the completely opposite track.<\/p>\n<p>The more experts you consult, the clearer the picture should become. Never proceed until you feel largely comfortable with the route you\u2019re going to take. Not everyone is likely to agree with you, but you\u2019re more apt to feel comfortable about your decision.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/p>\n<p><em>What methods have you used to fund your real estate deals (or what are you considering)?<\/em><\/p>\n<p><strong>Leave your comments below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Discouraged from buying real estate because of your less-than-stellar credit score? Let&#8217;s explore whether a low credit score really means you won&#8217;t be able to get your property investing career up and running. <\/p>\n","protected":false},"author":59534,"featured_media":83503,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-88171","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/88171","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/59534"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=88171"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/88171\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/83503"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=88171"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=88171"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=88171"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}