In a recent article over on biggerpcokets.com a real estate blog. Larry Alton talked about how you can manage bad credit when you looking to get into real estate investing. Larry listed the top 4 ways of managing bad credit and I found it very informative.
Here is a quick recap on what he said.
1.) Credit Repair
If it's broke fix it! This is more or less what Larry was meaning. He mentioned there were several services out there of professional companies who can help you figure out how to repairs your credit if you don't have the time or knowledge yourself.
"If you don’t have the time to fix your own credit report, you can hire a service to identify and correct errors for you. A reputable credit repair company will analyze your situation and assist you in getting back on the right path."
2.) Seller Financing
Larry mentioned if you can't get your credit in better shape then looking at options of seller financing such as rent to own type of deals might be an option for you.
3. Hard Money Loans
What is a hard money loan? Larry explains,
"With a hard money loan, a private lender offers up the money you need to purchase a piece of property, and you repay the lender at a rate they determine. Again, your credit history doesn’t have to factor into this."
4. Wholesaling
"Finally, you might look into wholesaling. It's a quick no-money-down, real estate investing method, which a lot of people have used to get started when they have little cash and/or bad credit. With wholesaling, you find a house that someone is looking to unload- likely one that needs repairs - and you enter into a contract with the seller that gives you the option of assigning the deal to someone else. You then find someone who wants to buy the house for more than the original contract, and you collect the difference as a fee for your services."
My thoughts
Larry wrote a great article, however I truly believe focusing on your own credit repair is the best option. Yes getting into real estate now would be ideal, I get that. Most people need to look at themselves first because if you don't look good on paper then there is a reason for that and you need to focus on improving that now before you get thousands of dollars into debt.If possible opening new credit cards and not using the balances, or using only 10% of the balances will increase your credit limit and lower your credit card utilization, which in turn generally helps your credit score go up. There are many options and ways to improve your credit. Using the link above in option 1 and having a professional company help you is a great idea!
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America's Favorite
The Small Time Investor
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