Conventional Loans for People with Bad Credit

[Adam Gratt]

I have traditional buyers come to me and ask about what their options are, especially since all the issues with COVID have caused their credit score to drop. Since I am sure there will be a lot of people coming out of this crisis with bad credit. I want to help these people so I am looking for reputable lenders who work with people with a score around/below 600. Any help would be greatly appreciated.

Thank you in advanced.

[Kevin Romines]

As a lender, if one of my buyers has a score less that what the loan program allows, I run a report called the "What If Simulator". This report is tied to the credit report. It allows a loan officer to go into the credit report and make changes to the accounts, such as paying down balances, deleting accounts, paying off accounts, adding various new accounts, eliminating collections. It will tell us what the score will likely be, if these changes are made. The new score it gives you has proven to be 98-99% accurate. Then once I have the report set to what will work for the loan program, and what the borrower can truly get done, then I email that report to the borrower, have them take those steps, get back to me with the documentation proving they took the steps. 

Then I send in the documents to my credit company, and they do a rapid rescore with the bureaus. Within 3 days from there. I have the new updated score, and on we go with the loan request. 

Not all Loan Officers and or companies will do these reports. Its and investment in time and money on the part of the loan officer. It is illegal to pass on these costs to the consumer, so the loan officers that are willing to do them have had experience working with borrowers that have fallen short of scores needed. The loan officer is betting and willing to pay hundreds of dollars to get that borrowers scores up. Does it work in most cases, yes, however if you have a borrower that is living off of credit cards, such as a business owner, and cant stop using the cards long enough to get this done, then the scores wont come out correct.

I have only had 1 borrower, a restaurant owner, who couldn't stop using his cards long enough for me to get the score I wanted. I eventually did get the score I wanted, but I was into that borrower near $1000 before I did. In the end it was still worth it, but it consumed a lot of my time and money.

For this reason, you will find most loan officers will not devote time money or resources to borrowers of this type. They look at it as this type of loan will drag down the time they could be spending on cleaner quicker closings.

Just my 2 cents!!!