Credit score of 400 plus..

36 Replies

BP People, what would you do if you wanted to get any loan or hard or private money lending but your credit score was 400 something and you weren't able to get anything to help get started in your real estate venture and wasnt able to build up your credit score because of lack of income, not able to land a job or borrow from friends and family, what would you do in this situation???

All Experts chime in for those new who haven't begun real estate yet or struggling right now.

Forget real estate, fix the basics.....income, expenses, etc.

Any trade skills where you can demonstrate some competency (even if you learned informally)? Carpentry? electrical? plumbing? mechanic? fiberglass? welding? 

fixing that credit problem is #1

if someone has no income, no cash, no experience, and bad credit, they will have to prove to the world they can fix these problems first. Fixing the self created, and self limiting problems is the most valuable, because these are the simplest problems, and the ones that will have most impact on your ability to help other people fix their problems.

a good credit score is reference that you can properly manage resources, without it, it's hard to convince someone you have that skill.

I had terrible credit when I was younger, it's a roadblock for sure, but one that isn't too hard to beat with a little focus and tenacity.

There is still a lot that can be done while you're preparing: Educate and network

Agree with @Wayne.

Real estate is not a fast way to get rich.
It takes a long time to build a portfolio.

Work hard to find two jobs, any job include Macdonald’s job.

Start to have a habit to pay all the bills on time, pay off all the debt gradually to build up your credit score back to 700’s.

After two years of W-2 job with 700’s credit score, you can get a 3.5% down payment FHA loan to buy your first property.

I 100% echo exactly what @Alexander Felice said.  I think you should work on fixing credit but learn and network as much as possible in the meantime.  

Originally posted by @Alexander Felice :

fixing that credit problem is #1

if someone has no income, no cash, no experience, and bad credit, they will have to prove to the world they can fix these problems first. Fixing the self created, and self limiting problems is the most valuable, because these are the simplest problems, and the ones that will have most impact on your ability to help other people fix their problems.

a good credit score is reference that you can properly manage resources, without it, it's hard to convince someone you have that skill.

I had terrible credit when I was younger, it's a roadblock for sure, but one that isn't too hard to beat with a little focus and tenacity.

There is still a lot that can be done while you're preparing: Educate and network

 Yeah but that person can end up having Student Loans killing their score and maybe a utility bill.

Originally posted by @Mary L.:

Agree with @Wayne.

Real estate is not a fast way to get rich.
It takes a long time to build a portfolio.

Work hard to find two jobs, any job include Macdonald’s job.

Start to have a habit to pay all the bills on time, pay off all the debt gradually to build up your credit score back to 700’s.

After two years of W-2 job with 700's credit score, you can get a 3.5% down payment FHA loan to buy your first property.

 Your right its not an easy thing to start in, regardless what these gurus say.

Work on your credit score. Go to a local credit union and they can talk you through the process

Hey Duane, I know it can be hard to wait.  I get impatient too.

But look at this as a marathon, not a sprint.  Start with the basics as others have recommended: get an entry level job, see if you can do a related field even if its just cleaning up around a construction site.  Drive Uber, buy cheap stuff on Craigslist and fix it up and re-sell it, learn some basic carpentry and learn to build adirondack chairs and sell them...just brainstorming money making ideas.

Get debts paid off, get a basic credit building credit card. Get a small nest egg built up and you can get into a house hack with an FHA loan with 3.5% down.

You can do it, just got to hustle!

Neither student loans nor utility bills will kill your credit score.  Not paying student loans and utility bills will.

What would I do in your shoes?  Find a job.  Any job.  Or two.  Or three.  Take care of your bills and your credit will improve.

Dave Ramsey's "Total Money Makeover" is a great book for starting to get your financial house in order.  I don't agree with him 100%, especially around leveraged investing.  But for personal finance he's spot on.

Originally posted by @Duane G. :
Originally posted by @Alexander Felice:

fixing that credit problem is #1

if someone has no income, no cash, no experience, and bad credit, they will have to prove to the world they can fix these problems first. Fixing the self created, and self limiting problems is the most valuable, because these are the simplest problems, and the ones that will have most impact on your ability to help other people fix their problems.

a good credit score is reference that you can properly manage resources, without it, it's hard to convince someone you have that skill.

I had terrible credit when I was younger, it's a roadblock for sure, but one that isn't too hard to beat with a little focus and tenacity.

There is still a lot that can be done while you're preparing: Educate and network

 Yeah but that person can end up having Student Loans killing their score and maybe a utility bill.

Plenty of people have student loans and utility bills, these things are not inherent in the problem. It's only a problem when they aren't paid. Any of your future partners will need you to take responsibility as well, and excuses 

Not to get too personal, but I would recommend reading some books on radical responsibility. When you realize that your life's faults are deeply, truly, and sometimes embarrassingly, your own, it's empowering. It's hard at first because no one likes to admit they are the cause of their own struggles, but it's useful because it can teach you that the cause of your own success falls only on you as well. 

The blame for poor situations isn't to be shifted or avoided but accepted and then used to as a catalyst to improve. 

You'll do great, lots of good advice in here. Stay focused, solve these small problems and you'll be primed to solve some big ones next. 

Unless you can find a partner/investor, your options are to save up cash and get your credit score to hard money lender minimums. These vary by program, but I agree with the other recommendations here on top of that. After something happened to me that emptied my bank accounts and maxed my cards my credit was destroyed to the 500 range... I didn't have assets to sell or any passive income to help me out as a college student. I didn't have family to bail me out either. I took the first job I could and it wouldn't even cover my bills.

Here I am three years later with my credit back up in the 600s, I have three jobs, and I'm working to get into REI. Some things happen that you do not expect or can control (contrary to the "everything is your fault in life" belief), but everyone posting hits on this well: Nobody cares whose fault it is or why it happened. Everyone cares about what you have to offer right where you are. Especially when they're justifying trusting you with several tens to hundreds of thousands of dollars.

Onto the "what would you do" question...

Personally I'd recommend finding an investor to bring deals to alongside a day job.  You learn how to properly analyze deals, get paid on commission, and build the network you'll utilize as you grow into a position you're capable. It may not be easy to find, but keep looking and networking for that as you improve knowledge on your own to build value. 

It's possible to get a loan but it would be from a Hard Money Lender just make sure i you have a deal it's a killer deal also you need to work on your FICO at the same time get a couple of secured cc and pay them on time if possible draft a budget and watch you spending.

I’m dealing with this very issue! I’m on the down hill side now... it’s taken a couple of years of hard work and determination, as well as paying some high interest rates to get back. I ended up down in the 400’s as well. Regardless of circumstances it just couldn’t be avoided, I had to address it. Justified or not I was in debt and(student loans and all) I had to contact lenders and make arrangements and follow through! Most creditors, even student loans, will work with you if you contact them and keep your word. Many will even negotiate a lesser settlement. 

Go for it. You got this! 

I would really focus on improving your credit first and foremost. Maybe talk to a credit counselor, but it would be very helpful for you to get that up into the 600's for any kind of financing.

Spot on - no excuses for the financial mess we find ourselves in - we must own it! A 400 CS is not created by student loans a utility bill, it is countless debts that have gone unpaid credit cards/ car loans / phone/utilities etc... Repay and rebuild just that simple no reason to dance around this situation. With unemployment at 4% those who want to work can write their own ticket if they have drive/desire and are motivated. No job means quite frankly don't want to work. Enf of my rant. Real Estate is extremely rewarding on so many levels but just like anything no short cuts. Hard work will get you where you need to go along with forums like BP. I am extremely impressed by the caliber of investors on this site been doing this for 38 years and am learning many new ways to invest in RE. Happy Hunting !

If you can find a good deal, credit will not be an issue at all. Low credit score will mean a higher interest rate, but the funding is definitely possible. But you will need at least 3 months of interest only payments in the bank to get the green light. Let me know if you have any questions

As hard as it is to hear, @Wayne Brooks is right. Income first. The reality is a loan right now probably isn't an option for you. Yes, you might be able to get hard money, but those come with high interest rates that are likely to get you into further financial trouble.

Use your desire to invest in real estate as motivation to tackle the basics first. Get creative. Get the right attitude. There are jobs out there that you will even enjoy doing! You just have to find one.

I'll put a different spin on this one. I agree with many that getting your FICO up is a great tip, it can look insurmountable I'm sure. In my opinion, don't focus on the score, focus on the habits that improve the score. I would work to find another investor that you could potentially work for and learn from. It will help you learn the business, can provide income and help you network with other folks in REI. I would imagine many contractors and investors are always looking for folks who have extra motivation.

I truly think for many folks in our society today they need a WOW moment to really get them going.  The idea of 5 bucks here and 10 bucks there and inching their way to financial freedom the way many of our parents and grandparents strived to do it is too much to undertake, so it leaves them on the sidelines.  I'd try to find the investor you can work for, to generate money, while improving your score while at the same time, still searching for ways to find a deal to get started.  The lift you'll get from the first deal will make it easier to grind through the other things.

Good luck!

no real estate for you (for now).   focus on your career/work/training/primary income and also (if applicable to you), take stock on any bad spending habits.   from here on out, work on a cash basis, no credit.  learn to manage that and in a few years you will come out stronger.

if you are unemployed for a long period of time and have mountains of debt, you should consider bankruptcy, you can file it yourself.

Hey! Everything you mentioned can be changed with research and drive. Start building your credit by paying off what needs to be paid off or calling the credit companies and having them remove any incorrect or old information on your report. Get a secure credit card (a credit card that is opened with a cash deposit) and utilize it until your score rises to a place where you can transition out of it...or keep it :) I'm 90k in student loan debt and my credit score is about a 740. Student loan debt only reflects negatively if the proper steps to maintain it aren't done. Call your student loan lender and inform them of your low income...you should be placed on an income based program which will lead to low payments if any payment at all BUT what  matters is that you're enrolled in the program so the lender will report your account in good standing even if your payment is $0 every month. 

All of this needs money....and any money helps. As someone said before..McDonalds, Walmart, waitressing or bussing tables, retail...there are so many job options available...choose one....put some money aside to pay down debts and open the secure credit card and go from there. Once your credit is stable and you begin to increase your income and savings THEN worry about real estate (or perhaps invest some money in index funds/stocks to begin as well). BUILDING THE FOUNDATION IS KEY. If you have any specific questions feel free to ask!!

I would find any job just to pay your debts while you work towards a longer term goal of a career. Perhaps reevaluate your life to figure out what you could do to find a more well paid career and take steps to reach it while you are working any job.

Once you get your life together with a job and improved credit, then venture into real estate. Without it real estate will be almost impossible to get into and if you do get into it somehow it could drag you down even further with even one bad deal.

Partner. Find someone who needs help with the leg work (making phone calls, running errands, etc.). Find jobs in RE. Build your network--go to REI meetups. Work on your income and your credit while you build your network and learn.

There are some companies sometimes where you give a 200 deposit and then they let you have  a card for 200 to start. The payments start happening on time and then slowly you ask for increases in limit.

Improving a score from where it is at and eventually getting credit all positive can take many years in some cases.

People have to take a (whatever comes at me in life I will take it on and succeed mentality). The second something bad happens in life or challenging and people want to check out or say look what happened to me that is when people give themselves permission to fail.

Life is tough,very tough but we all need to keep moving forward.

When I was 16 years old I lost my dad to a car wreck suddenly, my best friends dad to cancer, and my grandmother all in the same year. My world was blown apart and I had to figure out how to put it back together and see what I wanted in life. What I learned over time is everyone has hardships and they are just different not easier or harder than the other. 

A credit analyst told me something many years ago that I never will forget. She said there are people that make lot's of money in this world and those who make just a little. The difference is how the money and credit is used responsibly or not. Someone can make 500k a year and go broke and conversely someone with a sound plan and good use of money and credit can grow from something very little to something extraordinary.   

If people do not have much money  then they have time to read,read,read and learn,learn,learn. If people work then there is listening to the radio on the way home for an educational series. If time at home after work then people can read and learn. Where there is a will there is a way. I run 6 miles every other day. If I ran only when the weather was perfect and everything was nice I would hardly ever get started. Instead I make a choice to work out whether it is easy or hard to do that day.  

Many millionaires and billionaires today starting from nothing not even a nickel to their name. Some were homeless and others went door to door selling anything they could.

To become highly successful takes an unrelenting thirst for knowledge, consistent action, and daily self improvement. Pretty soon you learn that success is not a THING that happens but a DAILY way of life and construct of doing steps and actions.

90% of the population say they want success and wealth but when smoke and mirrors fades away and people see the real work behind it most go back to eating Doritos, watching movies, etc.

I have had other real estate brokers tell me what I do is too hard. I just accept to be successful it is what I have to do. They make 40k a year and I am in the top percentile in the country. It's a mindset. 

    

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