A good credit score is one of the most valuable assets of any potential real estate investor. Luckily, you can still invest in real estate with a bad credit score by various means. Before looking at how you can invest in real estate with a bad credit score, let’s look at the different types of credit scores.
Credit Score Ranges
A credit score is a three-digit number representing your likelihood to pay bills on time. There are many ways of determining credit scores. For instance, Fair Isaac Corporation (FICO) outlines credit ranges as follows:
- 800+ – Exceptional
- 799-740 – Very good
- 739-670 – Good
- 669-580 – Fair
- 579 and below – Poor
If you fall under the fair or poor category, you can still work on your credit score and improve it with time.
Can You Invest In Real Estate With Bad Credit?
As mentioned above, you can invest in real estate with bad credit using other means. These include the following.
Hard money lenders consist of businesses and individuals who offer short-term money with high interest rates to real estate investors. They do not focus too much on your credit score but the actual property you want to buy. Such lenders want to know if they can still profit from that property if you default on your payment.
Wholesaling involves getting a house from someone interested in selling the home on contract. You then take the contract to a real estate investor, sell the house at a higher price, and keep the difference.
Like hard money, private money lenders don’t focus so much on your credit score but on the quality of the property you want to purchase. Private money loans can be from anyone, ranging from a family member to a friend or acquaintance.
Even though it is always advisable to maintain a high credit score, you should not let your bad credit hinder you from venturing into real estate.