When applying for a loan for house buying, the lender demands a good credit score. But many times, the borrower cannot arrange for the score, which can affect the buying power. But with rent to own homes, the lender will be willing to lend money because the buyers will increase their score by paying the mortgage during the rental period.
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Do Rent to Own Homes Need a Credit Score?
Like all other house buying schemes, rent to own homes also requires a credit score. But a good thing about this scheme is that the lender is willing to lend the loan amount even if the buyer has a low or bad credit score. The house buyers must ensure that the mortgage payments are on time to build up the bad or weak scores.
Different Types of Credit Scores
House buyers have to know that there are four types of credit scores required at different levels of loan applications. The lenders will provide loans to candidates with a score of up to eight hundred points without hesitation. Then the preference will be for the people who have six to seven hundred points. The number of lenders who will provide loans to borrowers with a five hundred credit score is very low. Although lenders will give a loan to people who have a score of less than five hundred, the loan application will require equity as a guaranty.
Reasons Buyers have a Bad Credit Score
Have you ever considered why your good credit score turns bad? A bad credit score can obstruct the loan application process as many lenders demand a score of six hundred points or above. Experts like Stop Renting Albany have suggested the following reasons for having a bad score.
Fail to Pay Mortgage or Instalments on Time
If you fail to pay your credit card or mortgage payment at the right time is the main reason that the points of your score decrease. Sometimes people fail to pay the minimum amount because they forgot about it.
Credit Limit Has Reached Its Maximum
Another reason for having a bad score is that you have maxed out your credit limit. This happens when you have bought things with your credit card and cannot pay them back.
Applied to Various Loans at once
It has been advised by financial experts to apply for one loan at one time, and when you have paid it off, then apply for another. But applying for even two loans will be difficult to pay off.
Ways to Boost Credit Score for Rent to Own Properties
Below are how house buyers can improve their bad credit scores.
- You have to make sure that all debts are paid off before applying for another loan.
- Loan borrowers should ask the lenders to provide a detailed monthly payment report.
- House buyers have to ensure that they are making regular mortgage payments.
You should consider these points for rent to own homes credit scores.
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