My credit score is around 500, is there anything that can be done with this low of a credit score? Can I buy a home? Can I refinance my home with bad credit? These are some very typical questions that are asked by consumers with low credit scores or bad credit. Yes there are many options for consumers with scores in the low 500s. There are even mortgage programs for people with scores below 500 but they are harder to find and qualify for.If you can get someone with a high credit score to add you onto thier credit card as a co-signer, your score will increase.
Borrowers can still qualify for home loans with low credit scores. However, since it is a higher risk for lenders, these will usually carry higher interest rates and lower loan to value ratios.
If your credit scores are that low it may be an option to use a co-singer or coborrower with better scores to help you qualify for a loan.
Another option is to investigate mortgage programs that are not credit score-driven. Many lenders offer mortgage-only or rent-only loan programs where only your housing history payments are considered (mortgage or rent). These loan programs offer the opportunity to avoid having your credit score impact the approval of your loan, but they will usually carry a higher interest rate or require more down payment in order to qualify.
Correcting credit report errors can often be a long and labor intensive process. Be sure to keep any documentation from your creditors that prove the entry is an error. The three credit bureaus will usually demand to see the proper paperwork prior to removing or updating any trade line.
You also should consult with your mortgage professional to review your credit report and see if it contains any errors. In some cases, if you can document the mistakes, you can have errors removed and have your credit score redone. This may move your score up enough to give you more options in loan programs.
Make sure you work with a lender that uses "rapid rescore" to help their clients. This can help you get the fico score you need to qualify.
Sometimes, a 500 credit score borrower can qualify for a "land contract buyout" loan. They must first have a valid land contract (AKA contract for deed), and pay on the home for 12 months. If the borrower keeps all the cancelled checks, and pays on time, there is a good possibility of "refinancing" the land contract to get the homeowner qualified. See a reputable mortgage broker for more details.
This is another reason why it is essential to partner with a good mortgage professional who can review all of your options and work with you to determine the best scenario for you and your family.
