A bad credit score can prevent you from getting a home loan. In the current post-recession scenario, any score below 620 will fall into this category. Just a few years back, a person with bad credit score would’ve been able to obtain a subprime loan but in the wake of the economic recession, home loans for people with bad credit has become almost obsolete.
Although it’ll be difficult for you to get a home loan from banks or any private lender, you might get some help from credit unions and some state housing finance authorities that are situated all over the US. These credit unions may offer mortgages with low credit scores but within a certain limit. Let’s check out how these credit unions and the state housing authorities work.
Credit unions
Credit unions are mainly non-profit organizations that offer help to its members in the form of loans. Credit unions offer mortgages at competitive interest rates to maintain a good relationship and service. There are various credit unions in the US which help consumers get different types of loans. The eligibility criteria to obtain mortgages from credit unions are –
* You should be a member of a credit union.
* You should meet the minimum credit criteria.
* You should be a US citizen.
State housing finance authorities
State housing finance authorities assist people of lower income group to purchase or build homes by financing and preservation of affordable housing. Housing finance authorities like California Housing Finance Agency (CalHFA) can help you to obtain mortgages at an interest rate lower than the market rate. The eligibility criteria to get mortgages with poor credit scores are –
* Your new home should be your primary residency for the entire loan term.
* Your annual income should be within the required limit.
* You should meet the credit requirements of the agency.
* You should be a US citizen.
Although credit unions and housing finance agencies may help you to get mortgages with poor credit score but they have their own limitations. If your credit score is less than 620, the credit unions will not give you mortgages as well. So, instead of looking for mortgages with poor credit score, you should try to follow the ways that will help you to improve your score.
Ways to improve your credit score
Let’s check out a few ways with the help of which you can improve your credit score -
1. Pay your bills on time: Don’t ignore your monthly bills. Try to pay all your bills on time. This will help a lot to improve your credit scores.
2. Manage your cards usage: Try to use your credit cards as less as possible. This will help in lowering your card balances. The balance in your last statement is reported to the credit bureaus and then added to your credit score. You can improve your credit score by keeping your card balance to 30% of the card limit.
3. Don’t close accounts abruptly: Do not close accounts even if you’ve paid them off. Long standing accounts with good credit history can improve your credit score. Moreover, closing credit card accounts will reduce your overall available credit and will increase the debt ratio.
Thus, if you pay your bills on time and manage your account wisely, you can certainly improve your credit score within a very short time. Once you do so, you’ll not have to look out for credit unions or state housing authorities to get mortgages with poor credit scores.