Now I understand the title of this page can be a bit confusing. Home loans for bad credit is almost a contradiction. Society tells us that there is no such thing as bad credit home loans but thankfully society isn’t always right. Let me explain.
Candidates For Bad Credit Mortgages
There’s many types of “bad credit”. For someone to have a 580 credit score, we’d typically say they have bad credit. FHA says that the minimum credit score required to obtain an FHA loan is a……..you guessed it; it’s a 580. So what the FHA is essentially saying is that you can get home loans with bad credit. But where the rubber meets the road is….why is your credit score a 580? There are many different types of 580 credit scores. It all depends on your credit profile and what is making up that credit score. There’s a good 580 and there’s a bad 580.
Bad 580 Credit Score
A bad 580 credit score would be a credit profile with negative marks but also major negative marks. Major negative credit accounts would be things like foreclosures, bankruptcies, repossessions, high balance credit cards etc. Those are all considered major accounts and when your lender sees you simply stopped paying those major accounts it shows a real lack of security and responsibility. Now of course we all know that sometimes bad things happen to good people but the fact is….lenders can only go by what your credit profile says.
Good 580 Credit Score
A good 580 credit score would be just the opposite. It would be a credit profile made up of lots of little accounts. Things like medical bills, an old utility bill, maybe a small department store card and other small accounts. Now of course you want to make sure you also have at least a few good positive open accounts on your credit profile as well. The best way to immediately get some positive accounts on your credit is to get a couple of secured credit cards. A secured credit card is simply a credit card issued to you by a major bank but it’s secured by monetary collateral you put up. So for example if you put up $500 to get your secured credit card, the bank will then issue you a credit card with a $500 limit. You use it just like a normal credit card. Depending on the bank, you could get your initial collateral back after 8-10 months of good payment history so your credit card would then become an unsecured card.
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