Wholesaler · Charlotte, NC · Member since 2013 · 269 posts · 66 votes
Hey Guys I was curious if anyone had a ballpark minimum credit score for Real Estate Investing. I am in the process of rebuilding my credit and wanted to know what score to aim for while re-building my credit. Also what are some suggestions for do this I have heard a secured credit card is the way to go any other thoughts would be much appreciated.
Investor · Milford, CT · Member since 2012 · 592 posts · 285 votes
12y
I just went through a what if scenario with my local bank on how much personally I can borrow. I was surprised I was only able to borrow about $180k, mind you median housing around here is like $300k. I have 800 credit score average among all three.
I think I am going to stick with commercial financing as I have been doing because I can borrow a lot more than that but of course the properties comes under some scrutiny (Appraisal, LTV, DTI) but that is fine as I only lock into cash flow positive properties.
Clean up your debt and I am sure you can get your number up a bit.
It really depends on what your niche and strategy are however I would shoot for 720+. Good credit always comes in handy no matter what you are doing. If you are applying for conventional bank financing it will become even more important. However if you are wholesaling properties and using private funds it might not be utilized on a daily basis.
You never know when you will need to use your credit. For that reason I think it's important to keep it high.
Good luck and I commend you on turning your credit around!
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
12y
I'd agree with Chris a 720+ should be a good goal to shoot for, I'd say initially 700+ will get you into the "good" range though.
As far as what to do to build your credit, it really depends on what your negatives are at this point. If you have a couple maxed out CC, don't get another secured card. Also don't cancel any cards you have already, age of your credit is part of your score so cancelling old accounts actually will hurt your score. A place that can be helpful for an idea of what impacts your score and how is Creditkarma.com (no affiliation). You can play with some different options and see what will happen to your score over time.
Wholesaler · Holiday, FL · Member since 2013 · 571 posts · 221 votes
12y
Audrey,
I would call Capital One and explain the situation to them. They will have a product to suit your needs - and will grow with you as you rebuild. Credit scores are used for everything now: insurance rates included.
Wholesaler · Charlotte, NC · Member since 2013 · 269 posts · 66 votes
12y
Thanks Guys for all the responses. I am aiming for 680 currently as I do not plan to use conventional financing for my deals. But will ultimately shoot for 720+ by the time I am 35 years old.
Rehabber · Smyrna, GA · Member since 2013 · 864 posts · 510 votes
12y
Like others have said, it depends a lot on your strategy. I personally have no idea what my score is, I haven't asked a bank for money since 2006. You can do plenty in this biz without a credit score.
Don't get me wrong, I borrow money, I just dont do it from banks. Credit has its uses and the model of buying depressed real estate with super cheap money in a strong rental environment is a good (fantastic) one, its just that after fighting so much with those bastards when the market tanked and I had loans out the wazoo I'll personally never give up that much control of my business again.
You can wholesale with no money and no credit, you can rehab with other peoples money, but if you are building a rental portfolio you're way better with bank funds (or partnering with someone who can get bank funds).
Investor · Milford, CT · Member since 2012 · 592 posts · 285 votes
12y
I just went through a what if scenario with my local bank on how much personally I can borrow. I was surprised I was only able to borrow about $180k, mind you median housing around here is like $300k. I have 800 credit score average among all three.
I think I am going to stick with commercial financing as I have been doing because I can borrow a lot more than that but of course the properties comes under some scrutiny (Appraisal, LTV, DTI) but that is fine as I only lock into cash flow positive properties.
Clean up your debt and I am sure you can get your number up a bit.
Real Estate Investor · Arlington, VA · Member since 2012 · 300 posts · 277 votes
12y
@Audrey Truesdale,
This is sort of my niche. I had a forelcosure in 2009, that finally finished in 2011. I can in 2014 qualify for an Owner Occupied FHA loan. However, for second properties most banks say no until 5-7 years has past.
Because of that, I had to get creative with financing, and you will pay higher interest rates because of it (I pay anywhere from 0 with free financing plans to 10%-that may be too high for some people, but my full time job can support that). @Darrell Shepherd has it right: Low priced housing helps (I only invest in properties under 30k), and financing through personal loans, credit lines through contractors and Home Depot/Lowes, and my savings and salary. Between those 4, I can pay more than 20k in renovations through line of credits, and a personal loans/401k/savings/salary can cover he rest. Im still here, so it works when you don't have the best credit.
However, the answer to your original questions, and im always asking around because every institution is so different, is 680. 720 is great, but 680 will get you in the door. At least 18 months (24 months is best) from your last negative on your credit report. Credit Unions are 10x better than the banks for more relaxed loan underwriting standards, from personal to mortgages in my experienes. Good luck on cleaning your credit, its ongoing with me, and this website was phenomenal in giving great tips: creditinfocenter dot com. Excellent. I even paid for the book, and thats helped a lot.
Don't give up hope, just tweak your financing strategy a bit. But, everyone here is offering good advice.
Urbana, IL · Member since 2012 · 1k+ posts · 425 votes
12y
I just visited a lender who said my score of 704 was great although now reading this post I'm not so sure. This particular lender doesn't deal much with investors so I think its a different scale than I was hoping for.
Wholesaler · Saint Louis, MO · Member since 2013 · 336 posts · 54 votes
12y
@Audrey Truesdale I am just starting out myself and working on my credit score. I want to own my first property and my mentor is pushing me to do the same. So I have the incentive to do so but it is taking a while to get my score up. Also, contact your local REIA club because they probably have a program to help with this just like mine does. Good luck to you!
Wholesaler · Charlotte, NC · Member since 2013 · 269 posts · 66 votes
12y
@Steven Johnson is this particular lender a major bank such as wells fargo BOA Chase, Also I talked with an Investor here locally and he told me that Suntrust Bank is a great lender for investment property so that some FYI for those looking for a major lender to borrow from. He said they lend on multi-family properties with 10-15% down and also depending on ARV lend on fix-n-flip properties which may help those looking to do so.
Loveland, CO · Member since 2013 · 2 posts · 0 votes
12y
Besides real estate investing, I am an independent agent for United Credit Education Services. This is a nationwide service. We can help you improve your credit score faster. Please feel free to contact me. I know we can help.