In almost all areas of financial life, your credit score plays a crucial role. We all know that if you're buying a car, applying for credit cards, or refinancing your home, your lender is going to use your credit score to determine your interest rate or decide on whether they will work with you at all. But did you know your credit score can also affect other areas of your life? Credit can be used to set your insurance premiums, rent an apartment, or even determine whether you qualify for a cell phone plan.
Mistakes early in your adult life that adversely affect your credit can have a lasting impact through adulthood. Even after you've resolved the underlying issues, getting out of a credit hole can be painful and expensive. It takes years to improve your score, and it's made increasingly difficult because low scores mean more expensive payments and fewer opportunities.
Bad credit sets up barriers to success in many parts of life, but there is one path where your credit has no impact.
Hard money loans through The Hard Money Co. do not require a credit check and have ZERO impact on your credit score moving forward. This means, that no matter where you are in your financial journey, The Hard Money Co. will work with you to move forward. We understand that your past is not always indicative of your future and that opportunity should be made available to those who work hard and are driven to succeed.
Why Don't Hard Money Lenders Check Credit?
If everyone else is so concerned about your credit score, why don't hard money lenders perform a credit check? As real estate investors ourselves, we recognize a good opportunity when it comes across our desk. The Hard Money Co. is an asset-based lender which means that we review the merits of a deal on its own terms. If a distressed property can be acquired at a low enough value and has a high enough after repair value to warrant investment, we will lend on the property. The credit score of the investor never comes into play.
This works in the inverse too. A potential borrower could come to us with a perfect credit score of 850 and all the references in the world. If their deal doesn't live up to our standards, we will not lend. This has served us well over the years and has leveled the playing field for all real estate investors who work with us.
Most financiers or traditional lending institutions use a credit score to mitigate their risk when issuing a loan. We mitigate our risk by doing the hard work of reviewing your deal, performing a Comparative Market Analysis (CMA), and communicating with you to hammer out the specifics of the deal. Not only does this lower our risk on the loan, but raises the likelihood of success for the borrower.
Why Do You Ask for a Credit Score in the Loan Application?
Good question! In our loan application, we have a question where we ask you to self-report your credit score. While your answer doesn't affect whether we'll provide a hard money loan, it does have some importance. Real estate investors typically have two potential exit strategies for their investment properties. The first is the most common, where they fix and flip the property by selling it when the renovations are complete. In this instance, your credit score has no impact whatsoever.
The second exit strategy is the rent and refinance, or BRRRR method. Here, investors rent out their property, refinance out of their hard money loan, and use the proceeds to invest in additional properties. This is an excellent wealth-building strategy that allows you to continue to utilize leverage to grow your portfolio. However, it does require that you refinance with a long-term loan product through a traditional lending institution that WILL require you to meet their credit requirements. If this is your strategy of choice, we want to maximize your ability to successfully exit from your short-term, hard money loan.
If you're concerned about your ability to refinance, there's nothing to worry about. Just change to a 'sell' exit strategy and your credit will never be considered.
Does The Hard Money Co. Report to Credit Agencies?
Not only do we not check your credit, we never report our financial interactions to credit bureaus. Even borrowers that are late or default on their loans will not see their credit score affected by their dealings with The Hard Money Co. If you are an individual who worked hard to improve their scores, or can't afford to see their rating take a hit, we can assure you that we operate entirely outside the credit score reporting system.
Final Thoughts
We recognize that credit scores play an important role in our financial world. But we also know that people and circumstances change much faster than your scores can. Our ability to lend based on the deal itself and not the reputation of a borrower sets us apart from other lending institutions and it's our flexibility that makes us the perfect partner for real estate investors.
If a partnership with The Hard Money Co. makes sense for your investment opportunity, start by filling out a loan application and being your journey today.