How to Buy a Home with Bad Credit

Someday I'll go where there ain't no rain or snow,
'Til then, I travel alone,
And I make my bed with the stars above my head,
And dream of a place called home...
- Kim Richey

Who doesn't agree with these words? All of us dream of having a home where we can kick back our feet and relax on a hard day's night. But not all of us have the financial muscle to pull off a house purchase purely on cash terms. And after most of the big mortgage lenders went down during the sub prime crisis, if you have anything less than a squeaky clean credit history, that all important credit required to buy your dream home is going to be pretty elusive.

But like I said, the lenders who have remained afloat intend to learn from the mistakes of others, and a person with bad credit is going to have the doors of the bank slammed in his face. What are the options available to a person seeking finance for his dream home, but has a bad credit.

Home Buyers with Bad Credit
Unfortunately, not many options are available. But the one which I'm about to suggest may be a little tedious at the start but will reap better rewards in the long term. In my opinion, the best suggestion to buying a home with bad credit, is to improve your credit rating. It may sound a bit elaborate, but consider the rewards. Firstly, having a good credit rating will make sure that you get the financing from the lenders. You will be able to access credit for any reason at any time from any lender. Doesn't that sound good?

Well, I'll tell you something else. Almost all banks do a credit monitoring exercise before sanctioning a loan. People with a bad credit rating may get loans, but they get it at a significantly higher interest rate. So if by chance, you do get a mortgage loan sanctioned it is going to ask for an interest of almost 2% more than what you would be asked, had your credit rating been good. And 2% is a LOT of money considering that a mortgage loan payments are made over several years. So by improving your credit score you can not only get access credit easily, but you can do so at good interest rates.

How to Improve Your Credit Score
Improving your credit score might take some time and some work, but it is worth it if you keep in mind the above-mentioned benefits. There are several things you can do to improve your credit score. Some of the most obvious include:

• Pay off your bills on time. By consistently ensuring timely payment of the bills, you can improve your credit rating
• Use credit cards and debt sparingly. Don't let the credit card bills get out of hand. Keep a manageable debt-to-income ratio, and pay your credit card debts on time.
• If you have trouble sticking to the payment promise you made to your creditor, tell him so in good time. It is better to confront the creditor and win his trust, rather than absconding and reducing your social credit rating as well.
• Don't move around your debt. Stop 'deficit financing' your life.

Some of the less obvious ways of improving credit score are:

• It may be a good idea to not close unused accounts, especially if they show no history of credit. They might vouch for you!
• If you are confident that you can pay off short term loans, then it may also be a good idea to take them intermittently and pay them off on a timely basis. This might show that you are using and paying off credit responsibly.
• Beware of credit repair scams as there are many people that promise to fix your score and then charge you a stupendous fee.
• Appearing to be a good guy has its advantages. So make sure you look like a responsible citizen. Pay your taxes on time and get your name on the electoral roll. It sounds silly, but it helps.

Remember, all this may cause inconvenience to you for a while, but it is going to be beneficial in the long run. The answer to how to buy a home with bad credit, is to fix it once and for all.