How can I get a loan with a credit score under 500?

Traditional lending sources will limit their programs to those with a score above 500. Many borrowers have scores that are near or below this level. What can you do if your score goes below 500?

The sad truth is that the only loans available for these borrowers is through private sources, sometimes referred to as “Hard Money”. These lenders will loan up to 70% loan to value and usually require minimal employment and credit verification. The fees can range from 5 points to 10 points plus closing costs. Interest rates can range from 10 - 18%. These loans are interest only and some will include a prepayment penalty.

These should only be used as a temporary solution. For example, by paying off consumer debt that is late your scores will improve and once they are above 500 the traditional sources become an option again. I suggest only taking loans without a prepayment penalty and having a firm plan for refinancing out of any hard money loans.

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