Can You Invest in Real Estate With Bad Credit? (Maybe… Here Are 5 Ways to Do It)

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One of the most common questions I am asked each week on the live BiggerPockets Webinar is simply, “Can I invest in real estate with bad credit?

It’s a great question, considering twenty-five percent of Americans have a credit score of less than 600, according to the Wall Street Journal. That’s a huge chunk of individuals who are unable to obtain a mortgage, thus making real estate investing a difficult task.

So, can you invest in real estate with bad credit?

Well, I have good news, and I have bad news:

  • The good news is YES; you can invest with bad credit. Later, I’ll explain five ways to do it.
  • The bad news is you probably shouldn’t. Unless… (We’ll get to that. But first…)

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Why Do You Have Bad Credit?

Bad credit can happen for a variety of reasons. Perhaps medical bills caused the issue, or maybe identity theft. Maybe a person lost their job and had to miss some payments. The economic recession that started in 2007 led millions of Americans into financial difficulties, destroying millions of credit scores in the process.

But also, sometimes bad credit is caused by good ole fashioned stupidity and ignorance. A credit card here, a credit account there. Vacations, new clothes and other “need-it-now” luxuries have caused thousands of people to lose their good credit score and wind up in a rough spot.

No matter what reason you have for having low credit, it doesn’t matter anymore. It’s done. You have bad credit. But the real question is:

Is your bad credit a symptom of a greater problem? 

I ask this because most of the time, it is. It’s a symptom of greed, selfishness, impatience and other terrible money habits.

The truth is, what if everyone’s credit score was suddenly boosted to 800 and 100% of their debts were wiped out? What would happen? Within three years, you would likely find the same people with the same low credit scores and high debt.

Because the credit score is merely a number that represents your financial ability to manage your money.

The credit score is just a symptom of a greater problem.

Now, before you think I’m being a jerk, leave this post and go back to watching Dancing with the Stars, understand that I’m not just talking to you. I’m talking to ME as well.

I haven’t always had good credit.

When I graduated high school, I fell into the debt trap that many college students do. Student loans, credit cards and in-store credit. I needed certain things, so I bought them. Sometimes I would forget to send a check and I’d get hit with a late charge and a declining credit score. Other times I would use one card to pay another. I quickly maxed out several credit cards. It was a dangerous game.

It wasn’t until I read Dave Ramsey’s book The Total Money Makeover that I realized I had a problem and I needed to change, so I did. Today I have a mid-700s credit score and haven’t had an issue in years. But I still remember what it was like to struggle with that credit score.

Can you identify with that? Then keep reading.

Have You Recovered From Your Debt Disease?

The reason I bring all this up is because what I’m about to teach you is powerful. It does work. There are many ways to invest in real estate with bad (or no) credit. However, it’s not going to matter at all if you haven’t first addressed the underlying reason for why you have bad credit. Perhaps you were young and dumb, and you’ve grown up but haven’t been able to raise the credit score enough yet. Or perhaps it truly was 100% not your fault, and someone stole your identity (but I doubt that).

The point is: Take some deep reflection and look at your life. Are you truly over the cause to your bad credit? Answer that question honestly, and until you can 100% say “YES,” don’t invest in real estate. To help you answer that question, ask yourself these three things:

  1. When is the last time you put something other than food on a credit card because you didn’t have enough money to pay for it?
  2. When is the last time you read a book on credit repair?
  3. What does your written budget look like? (What? You don’t have one? Uh oh…)

Real estate investing will NOT solve your bad money habits, and anyone who says otherwise is trying to sell you something. 

Now, before we get to the five ways to invest in real estate with bad credit, let’s talk about how you are going to improve your credit.

How to Improve Your Credit

In a moment, I’m going to share some great techniques for investing in real estate that don’t require any credit score. So why do we care about improving your credit?

Because soon you are going to want that sweet, sweet bank money.

Bank loans may be tough to get, but it’s hard to beat the low interest and long terms that a bank can provide. Maybe today you don’t need it, but when you are looking to finance that 60-unit apartment building or the million dollar house, you are going to wish you had that great credit.

Besides, if you are unwilling to work to improve your credit, it simply means you haven’t recovered from your debt disease, and it’s going to kill you financially. You might as well go back to playing Call of Duty with your buddies.

There are a billion articles on how to improve one’s credit score, so I don’t need to go too deep on that here. But the following six tips should help:

  1. Commit to Fixing Your Debt Problem. This will not be easy. Are you willing to do what it takes?
  2. Start Making More Income. Yes, that means you might have to put in some extra hours at work and find other ways to hustle. You need to get current on ALL outstanding debt and pay off what you can.
  3. Lower Your Balances. Make sure the balance on all of your revolving debt is less than 30% of the limit. High debt-to-limit ratios make your credit worse.
  4. Stop Applying for Credit. Seriously, stop. It hurts your score.
  5. Pay Everything on Time, No Matter What. I don’t care if your child is sick and your leg falls off on the way to bring him to the hospital. You will pay every bill on time.
  6. Consider Getting a Secured Credit Card. Once your debts are current or paid off, consider obtaining a secured credit card. A secured credit card is a credit card that has a maximum limit of whatever dollar amount you deposit with the lender. In other words, you give the bank $500 and then they give you a $500 credit card. Use this to buy your gas, groceries and a few other things, and then PAY IT OFF IN FULL EVERY MONTH. This is your way to start building trust with the credit world.

Repairing your credit is going to take time. There is no doubt. But if you commit to the process, it can be done. Soon, bad credit will be just a memory.

Five Ways to Invest in Real Estate With Bad Credit

Now, for those of you who HAVE made a change deep within your heart and soul and are working on improving your credit… let’s talk. If you still would like to invest in real estate, let’s discuss five ways that it can be done.


Partnerships are one of my favorite ways to invest in real estate because everyone has something they are lacking. Partnerships help fill that void. For you, perhaps it is your bad credit, but maybe you have something that they don’t have. Time? Skills? Hustle? What can you bring to the table that will help them achieve their goals while you achieve yours?

Of course, when it comes to partnerships, one must be careful. Getting into bed with the wrong person can make you both incredibly dirty! Do your homework, vet your partner carefully, and as is true with all these tips, only invest in great deals.

RelatedReal Estate Partnerships: How to Find a Great Fit & Work Together Towards Success

Seller Financing

Seller financing is the process where the seller actually agrees to finance the property, rather than making you obtain a new loan. In essence, the seller agrees to let you make monthly payments to them until the property is paid off (or the term of the seller-financed loan ends).

Seller financing can be powerful, as sellers typically will not ask to see a credit score. However, the best use of a seller-financed deal is when the sellers own the property free and clear. In other words, they should not have a mortgage on the property. If they try to “carry the contract” on the home that they have an existing loan on, their lender could foreclose due to something known as “the due on sale clause.” So look for deals where the owner has no mortgage.

I believe seller financing will become increasingly popular in the coming years, as Baby Boomer owners of rental properties will be looking to get out of the game, but also looking to hold on to their monthly income. Seller financing offers a great win-win solution for all parties. It’s part of how I financed my 24-unit apartment complex with almost no money down.

Related: The Definitive Guide to Using Seller Financing to Buy Real Estate

Hard Money Lenders

Hard money lenders are individuals or businesses who lend money at high interest rates and short terms to real estate investors. Hard money rates vary, but typically fall between 10% and 18% interest, with less than two-year terms (often just six months). In addition, hard money lenders also charge large fees, known as “points,” which can add anywhere from three to ten percent of the loan amount. Many hard money lenders used to be investors themselves, but have moved to the more passive method of simply lending.

Sounds nice, doesn’t it?

Because of the high rates, high fees and short terms, hard money is ideal for house flippers and those looking to do the BRRRR method of real estate (Buy-Rehab-Rent-Refinance-Repeat). This way, the real estate investor can be in and out quickly, cashing out the hard money lender and moving on to the next project.

Hard money lenders rarely look at the borrower’s credit score, though it is becoming more common. In reality, the hard money lender cares most about the security in the deal. They want to know that no matter what happens, they will make money. If the borrower defaults, can they foreclose and sell the property for more?

If you have a low credit score but want to flip houses, hard money might be a great option. Just be sure to find an incredible deal so the lender feels secure, and then rock that flip and make your money.

Related: The BiggerPockets Hard Money Lender’s Directory

Private Money Lenders

Similar to hard money, private money lenders are individuals you might know and are looking to achieve a good return on their investment. Unlike hard money lenders, private money lenders are not typically real estate professionals who lend money for a business; they simply are looking to diversify their cash into other investments. Private money lenders might be your dentist, your mom, your neighbor or someone you’ve built a relationship with on BiggerPockets.

The keyword with private money is relationship.

When dealing with other people’s money, it’s unlikely they will ask you for your credit score. However, this means you must work even harder to make sure they receive the kind of return on investment they are looking to make.

This is when the discussion earlier about the credit score being a symptom really comes into play. Don’t take advantage of grandma’s kindness and lose all her money. In fact, I would recommend never taking money from anyone who couldn’t afford to lose it. That would make for an awkward Thanksgiving dinner.


Finally, let’s talk about perhaps the most popular method taught by the gurus for those with bad credit: wholesaling. Wholesaling is the business of finding great deals, putting them under contract and quickly “flipping them” to a cash buyer for a higher amount. Many wholesalers do this entire process without using a single dollar of their own money or ever needing their credit checked.

This probably sounds amazing to you, but before you head out the door looking for a good deal, understand a few things:

  • Wholesaling is a JOB. It is NOT passive, and if you don’t work, you don’t get paid! Most would say that wholesaling isn’t even investing since you are not really buying or selling the property.
  • Wholesaling is HARD. It requires time, patience and great marketing skills. You also must have the ability to talk with sellers on the phone, sell yourself as a credible solution to their problems, estimate rehab costs, find cash buyers and put the whole thing together without it all falling apart. In other words, wholesalers need to be good at the entire world of real estate investing. It’s not an easy task, and most people who try to wholesale never do a single deal.
  • There are legal implications regarding wholesaling and the need for a real estate license. Simply put, you should probably get your license. Click here to read more on this controversy.

If you are interested in wholesaling, don’t miss “The Ultimate Beginner’s Guide to Real Estate Wholesaling.” It’s pretty awesome.

Wrapping it Up

So, can you invest in real estate with bad credit?

Yes. However, if your bad credit is a symptom of something else, fix that first or you’ll never enjoy the true wealth that can come from real estate investing.

If you are serious about repairing your credit and building better money management skills, I’d recommend starting with The Total Money Makeover by Dave Ramsey, followed by The Richest Man in Babylon by George S. Clason. (And I don’t care if you don’t like reading… both books are also on Audible.)

If you enjoyed this post, I’d ask two quick favors from you:

  1. Please share this on your Facebook wall. You never know who it might help.
  2. Leave a comment below if you have anything to say in response or have any questions. We’re here to help.

(Oh… and don’t forget to sign up for the next BiggerPockets Webinar!)

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on Like… seriously… a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of “The Book on Investing in Real Estate with No (and Low) Money Down“, and “The Book on Rental Property Investing” which you should probably read if you want to do more deals.


  1. Bought house with son, once he could refinance on his own, he told me bye!!!
    Second house, mortgage in my name, so can get great rate. He is on title, pats for all mtg, tax, ins, so will own it someday, has bad credit, but will payoff.o

  2. Gloria Almendares

    Hello Brandon:

    I’ve heard that “credit repair companies” actually lower your FICO score? Is this true?
    Do credit inquiries lower your credit score? I have several credit cards that I don’t use. Should I cancel them, start using them, or keep them unused? Which option will increase my credit score?

    Gloria A.

    • Manuel Diaz

      Hi, I am in the process of using a debt settlement company. They set me up with a payment program that I pay into every month and they work with my creditors and settle my debts. So far I have settled two high credit card balances for half of what I owed. The problem is that while in the program you are paying into the program and not directly to the creditors each month so it looks bad and my score drops. But I chose to do this instead of taking 20+ years to finally pay off my debt. After my debt is gone I will start working on raising my score.

    • Joan Helm

      Be very cautious of credit repair companies. Most of of them are barely legal scams, but there is at least one company that is legit (can’t remember the name). The best place to learn more is

      Canceling all your cards at once can cause your credit score to drop. Once again, check with CreditKarma, or check out a recent book from your public library.

  3. kendrick walker

    Thanks for the detailed article Brandon.

    I have done over 70 flips in Sonoma County and I can say that each were financed with Hard Money! I am work at my family owned Hard Money Brokerage and there are many,many individual investors and families and individuals who we help with these alternative finance loans.

    I did want to amend the statement about length of hard money loans as there are programs for bridge loans of 12-18 months but also 5 – 15 year programs as well. Interest only hard money loans can be helpful to those needing a “jump start” to get into flipping or even buy a home at a better purchase price now and then later one refinance to traditional or conventional financing, once they fix their credit.

    Best, Ken

    • David Dachtera


      Payment history is 35% of your credit score in most scoring models (FICo, Vantage, etc.).

      Punctuality counts for a lot. Whether your line is secured or not, keeping payments current goes a long way toward maintaining good credit.

      I can send you a link to a credit scoring guide (.PDF), if you’d like. It will explain more about credit scores than most people want to know.

  4. johny michaud

    Great read. I am also working on fixing my credit score and bringing it back to the 700s that I once was at. My question is, how do one go about finding someone that wants to do a seller financing? It seem like a great way to start on small projects and both parties could benefit from it.

  5. David Dachtera

    Hi, Brandon,

    You should probably also mention that hard money lenders and private lenders both want to see how the deal produces a profit and how profits from the deal will repay their money with the agreed-upon interest. This shows them that you know how to analyze a deal and know how to put a profitable deal together where all the numbers work and all the numbers make sense.

    You should not be shy about letting them see your profits, as well. If you’re not profiting from the deal, they might not invest with you.

    Lenders like educated investors. Smart investors only deal with educated lenders. Everyone should know the rules. Everyone should be “speaking the same language”.

  6. John Howdyshell

    Hello Kendrick:

    Sounds as though your family brokerage is providing lending programs which are directed to help
    in more ways than one. You and family are to be complimented as you appear to have a genuine “people
    interest” as well as the profit …sort of rare these days. Maybe you could elaborate with information on how these programs work …they sound very appealing…

  7. We have had our eyes on a house that it a little out of our price range but we can make due with it still. It was baffling to read that twenty-five percent of Americans have a credit score of less than 600. To ensure that we get the house we want we will be sure to keep our score up!

  8. Jodi Kaili

    Thank you for sharing your knowledge on this subject. I really appreciate it. My husband and I are blessed with an excellent score, individually. However, we are newbies and it’s great to learn of the options for borrowing, as well as investing!
    Mahalo…we look forward to our new and exciting journey in the REI community. THANK YOU BIGGER POCKETS 🙂

  9. Sarah Walker

    If only everyone could feel the joy in my heart! I just got approved for a mortgage loan of $195k and it is third or fourth time that I get denied. My credit scores was about under 700 but more than 650 until i was introduced to a credit score expert by my friend that had similar issues. I paid him a little token and behold he fixed my scores to 788 just in 5 days. Words can barely express the way i feel about this but it is the most amazing experience in 2017. I can not keep this to myself at all, so for everyone out there with the same problem all you need to do is send this professional an email stating what you want and be sure to give testimonies about his services as well. Here you go ( [email protected] com )

  10. I took part in the Seminar held in Texas early this year.i was in a financial situations and i realized that i wouldn’t be able to get cash back on a Streamline refinance,i needed to look at a VA Cash-Out refinance for that and probably Veterans United loan officer.I was going through a divorce and lost track of certain bills/paper work.I don’t have a great credit rating as I haven’t been able to pay some bills..i just completed a student loan rehabilitation on my six student loans that went into default. My plan of getting married in a couple of years and getting a car can finally be actualized.

  11. Monica Hail

    I just kind of stumbled onto this post, while looking into getting into rel estate. I just need to say it’s a great post! I love the way you don’t beat around the bush and very truthfully about what should be looked at before starting real estate investments.

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