How Important Is Your Credit Rating For Property Investment?
The property market in the UK has seen a surge in activity and interest over the past year, and a growing number of people not only want to move home but wish to seize the opportunity to enter the bold world of property investment.
The key to buying homes as an investment is being able to secure affordable property finance, which is likely to only be available to people with a high credit rating.
Your credit rating or credit score is a number that is calculated by your borrowing history, history of paying bills and general financial management and is used by lenders to check the likelihood that the money will be paid back.
People who have defaulted on major payments or have declared bankruptcy will have lower credit scores than those who make regular payments and do not have large amounts of unsecured debt.
As it is about having proof you can make regular payments, young people or people who do not rely on credit can sometimes have low scores despite not having a history of defaulting.
However, there are ways for people with poor credit histories to start property investing, such as starting out in house flipping. This is where an investor buys a distressed or damaged property with a loan they do qualify for, renovate it and sell that off for a profit, getting them into the ladder.
As well as this, if you have friends or family who have better credit scores, they can act as a guarantor of the loan in some cases, although it must be made clear that any failure to pay back these loans will affect their credit score as well as yours.
Thankfully, bad credit is not forever. Paying off debts, paying bills on time and not opening too many lines of credit will help to keep your rating healthy and your options open.