Marty Searing
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Credit score under 500


Credit score under 500 - "What can I do if my credit score is below 500", you may ask. Most lenders out there will not accept loans with scores below 500. However, there is hope. Experienced mortgage brokers work with hundreds and sometimes thousands of lenders throughout the nation and work with lenders that specialize in these situations.


An experienced mortgage broker can help consult you on what you need to do to increase your credit scores and get them back over 500, and they can probably find a lender out there that can finance you even though your score is below 500. There are programs out there that will average your credit scores, use your high credit score, and only look at your mortgage history and not your scores at all. Therefore, contact a personal mortgage consultant to discover what your options are and to map out a plan to improve your credit situation and get the financing that you need.

When your credit score is below 500 there can be some serious issues. However if there is enough equity in the property, you are sure to find a lender who will lend against it! 

Something that I would advise anyone with a credit score under 500 to consider would be legitimate, professional credit repair. Good credit repair companies can often find flaws in the way derogatory information is documented and reported and can often get it removed. Consult with me for a more detailed description on what type of professional service you need because you must beware, there are many scams and rip offs in credit repair.

Credit repair companies charge fee's that range from hundreds to thousands of dollars. You will want to make sure you choose a company that not only charges fair fee's but one that can offer references and show past performance. Your mortgage broker should be able to refer you to a good credit repair service.

Generally, you will have a hard time finding financing above 70% of your homes value if your score is below 500. This means that, if your home is worth $100,000, you will only be able to get a loan for $70,000. This is a severe limitation for most people. For that reason, it is usually best to try to bring your score up, either on your own or through a credit repair company, before obtaining a mortgage.

When choosing a credit repair company, make sure you find out if they have a limit to the number of accounts or bureaus they target per month. You may be surprised to find out they only go after 1 bureau per month and up to 5 derogs per letter. These services will take the client forever to improve. Try to find companies without limits like that

Applicants with credit scores below 500 may still qualify for a mortgage or a loan to consolidate debt if they have enough equity or a large down payment or equity in their home. The lender will usually base their approval on the value of the collateral.

Banks underwrite mortgage applications base on three major criteria, credit scores, capability to repay the mortgage, and equity in the property. With credit scores below 500, a loan applicant must have positive compensating factors in other areas. In other words, he needs to prove that he has high income relative to his debts and that he has a bigger down payment.

There are many lenders out there that will lend on credit scores below 500. The value of your property in relation to what you owe is an extremely large compensating factor with these lenders.

With sub 500 scores you are going to be limited to very low Loan-to-value or LTV - meaning you will probably only get 60-65% ltv loan on your home. You will need quite a bit of equity to be able to finance.

If we are unable to find financing for your property and you do have enough equity in the home we may go through a hard money lender which only looks at the equity in your home.

Mid 500 credit scores - There are many home loan programs available out there for people with credit scores, or fico scores, in the mid 500 range. The mid 500 range consists of credit scores from anywhere between 530 and 570. Some of the programs that are available for credit scores are listed throughout this page.

There are many loan programs for people with mid 500 scores that will allow you to purchase a home with as little as 10% down. Some programs will even allow 90% financing all the way down to a 500 credit score. Loan programs in this niche change frequently, but most will require a full documentation loan, that will require you to prove your income, employment, and assets.

Most of these mid 500 score programs are designed to be short term loans for borrowers. It allows them to get into a home, get cash out, consolidate debt while waiting for their credit scores to improve so that down the line they will be able to finance a better rate/term loan.

There are benchmark scores that are important when getting a loan. Some programs only become available at certain credit scores. If your score is in the low 500's then chances are an interest only payment is not an option. The same with 100% financing. Usually the benchmark for 100% financing is at 580. However some lenders are now requiring 600.

This is why working with a mortgage professional that uses the "rapid rescore" technique is so important. Sometimes just doing a little credit fixing can make or break your next loan.


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Mortgage Broker | 50 Year Fixed Rate Mortgage Programs | MTA Index Refinance | Hard Money | Consolidating Debt - Refinance or 2nd Mortgage | What To Do When The Lender Says "No" | Cash-Out Refinance | Interest Only Mortgage | Home Equity Loan for Condominiums | 100 Financing - Investment Poperties | Why Would I Want a Stated Income Loan | For Sale By Owner Tips | Employment History
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