Credit Scores and Loan Options for Aspiring Landlords with Challenging Credit Histories

Getting into property can be very lucrative, but it can also be quite difficult for those with less-than-great credit scores. Your credit score can have a massive influence on how easy it is for you to get access to loans and mortgages, so it’s best to do all that you can to keep it as high as you can if you do want to become a successful property entrepreneur. Having bad credit definitely doesn’t mean that you can’t become a landlord. It just means that you may face a few more challenges than somebody with a better rating.

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Many landlords with bad credit have been able to make big gains on the property market. Here are some things that you can try if you do have a challenging credit history but wish to become a successful property investor and landlord.

Understand what your credit score means and how to improve it

Your credit score is a number that tells you how credit-worthy you are. Things that can influence your credit score include how well you have managed credit in the past. The higher your score is, the easier it should be to get access to credit when you need it. Many landlords run credit checks on potential tenants when they have properties to let out, but it’s more common than you think for landlords to struggle with bad credit themselves.

Start improving your credit score

If you do have bad credit but aspire to become a successful landlord, you’ll need to start building up your credit score as soon as possible. Get copies of your credit reports to see if they have any errors on them that are unfairly keeping your score down. If you do see any mistakes, get in touch with the lenders or credit reporting bureaus in question so you can rectify them.

You’ll also need to make sure you’re paying all your bills on time, paying down any existing debts and avoiding any unnecessary credit applications. Try not to apply for different types of credit in a short period of time. This can send a signal to lenders that your financial position isn’t stable.

What loan options for landlords with bad credit are there?

Specialist buy-to-let mortgages

Some lenders offer buy-to-let mortgages for people whose credit isn’t exactly perfect. You may have to deal with higher interest rates if you take out one of these mortgages, but they could be the key to meeting your ambitions and starting a new property portfolio.

Secured loans

Another option that might be available to you if you have bad credit but want to enter the property market is to get a secured loan. With a secured loan, the property itself will be the collateral. These loans also have higher interest rates but they can be ideal if you have bad credit and are struggling to find the right solution.

Joint ventures

You could also think about entering into a joint venture if your credit score and history are holding you back. Some people have partnered with people who have better credit histories in order to achieve success in the world of property. It could be much easier to get the credit you need if you start a property partnership.

Credit-builder mortgages

Some lenders offer credit builder mortgages that can help would-be landlords to rebuild their credit scores. Again, these mortgages tend to come with higher interest rates but can help you in the short-term whilst you’re trying to improve your credit rating.

Talk to a broker rather than your bank

If you have bad credit, you may not get the help you need from your bank due to automated checks. This is why so many landlords with bad credit go to specialist brokers who can provide support that’s tailored towards their situation. Many independent brokers have been able to help landlords with challenging credit histories to get buy-to-let mortgages.

What else can I do to boost my credit score to make borrowing easier?

One step you can take if you do want to improve your score is to keep older accounts open, even if they have zero balances. This will help you show you have a long credit history and that you aren’t using all the credit that’s available to you.

You should also get yourself on the Electoral Roll if you can. This can have a very good impact on your credit score and is linked to stability, which is something lenders give big consideration to when they’re deciding whether to approve credit applications.

If you have been struggling with debts, try to negotiate with creditors. Your creditors may be able to change your current agreement or terms to make things more manageable for you. You may be able to create a repayment plan that works better for you.

It could also be a good idea to speak to someone who specialises in helping landlords with bad credit to improve their situation. A broker or a professional financial advisor may give you bespoke advice that’s tailored directly towards your needs and work with you to create a strategy for improving your credit score.

Be patient

Although you may want to improve your credit score as quickly as possible, it’s important to be patient. It’s not common for huge increases to occur overnight. This is why you need to work at building your score over time and don’t give up if things don’t change as quickly as you want them to.

A less-than-perfect credit score can make things challenging for people who want to enter the property market, but you may have more options available to you than you think. Work hard to boost your creditworthiness, get tailored financial advice, consider a secured loan and find out more about any joint ventures you could enter into to put yourself in a better position. Carry out thorough research into your options and remain patient as you work towards your goals.


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