Are you thinking of buying a house, but you’re worried about your credit score? These days, having bad credit can negatively impact almost every area of your life. Your chances of getting further credit, including a mortgage, decline the worse your rating gets. However, that doesn’t mean it’s impossible.
There are several lenders who specialist in bad credit mortgages. The question is, is it worth buying a house with bad credit, or should you work on improving it beforehand?
Improve your credit score or take the plunge?
You can choose to go ahead and buy a property with bad credit, but it does come with some pretty big disadvantages. The main one is the amount you’ll be paying back, not just monthly, but overall.
When you have bad credit, lenders view you as a high-risk borrower. This means, they’ll increase the interest rate on the loan, meaning you’ll need to pay a much higher rate than you would if you had good credit. It also means you’ll end up paying back much more than you would with good credit too. Don’t be surprised to find you may even need to pay back double what the house is worth.
So, you could absolutely get a mortgage with bad credit, but it won’t be a good one! Therefore, it’s worth working on improving your credit score before making your application.
How to build up your credit score
There are a lot of ways to build up your credit score and the good news is it won’t necessarily take as long as you think.
One option is to take out a personal loan and pay it off on time, or ideally early if you can and there aren’t any early payment penalties. Make sure you choose a reliable lender such as Ocean Finance to avoid overly high interest rates. You should also make all bill payments and credit repayments on time every time.
Overall, while it is possible to get a mortgage with bad credit, it’s certainly not advisable. If you want to benefit from a low, decent mortgage rate and improve your application chances, it’s a much better idea to build up your credit rating. It won’t take too long and it will help you to secure much more affordable deal.