There are a number of reasons why getting a bad credit mortgage loan isn’t actually a good thing. Yes, it’s good that you are getting the mortgage you need for the house you love, but that mortgage is coming at a cost. Literally. The cost will be higher interest rates on your mortgage. This will vary depending on your personal situation, but sometimes it’s worth asking: is the bad credit mortgage actually worth the amount you will have to pay for it, and will the extra interest you’ll be charged just push you further into the red?
1) Not paying off your credit
For whatever reason, maybe you battled with unemployment, or maybe you or a loved one battled with an illness that required paying a lot of extra medical bills, getting behind in paying off your credit can result in a bad credit report. This isn’t irreparable, though. A lot of people think that bad credit is the end of the world, and that’s why a lot of people look into bad credit mortgages—but you can legally repair your credit. If your credit score was damaged by a stint of missed payments due to unexpected or uncontrollable circumstances, simply paying your bills regularly now will go a long way in helping you recover your credit.
2) Too many late payments
Just like missing payments, making too many late payments can damage your credit score (http://en.wikipedia.org/wiki/Credit_score). Similarly, though, simply making payments regularly and on time can help you repair your credit score over time. If you miss payments simply because you forget about them, you might be able to solve your problem by setting up automatic monthly payments through your bank or credit card—just remember to pay your credit card bill off regularly as well.
3) Too much credit
You want to apply for credit to build up your credit history, but submitting too many credit applications too close together can show up as a red flag to potential credit lenders. Be smart about the credit you apply to so you can build up credit without looking like you are desperate for credit. This can make it easier for you to get a mortgage without having to settle for a bad credit mortgage.
4) Bankruptcy
If you’ve had to claim bankruptcy in the past, recovering your credit is going to take a lot of time and diligence. To speed up the process, you may want to consult a credit repair specialist to see if they can help you get your credit back on track legally and efficiently.
5) No credit
Did you know that having no credit can actually be worse than having bad credit? Well, it may not be worse, but credit lenders may be leery of accepting your loan applications because there is no record of whether you will be a high risk investment or not. You may want to get a credit card and start building up a positive credit report so you don’t have to settle for the high interest rates of a bad credit mortgage.
6) Mistakes on your credit report
Have you ever checked your credit history for mistakes? Most consumers actually have errors on their credit reports, and these can actually cause you to have a lower credit score than you should, which may end up with you looking for bad credit mortgage loans instead of lower interest rate mortgage loans. Don’t allow clerical errors, mistaken identity, or incomplete data stop you from getting the house of your dreams at interest rates you can actually afford.
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