Credit Report Analysis

In one word, the most import element in residential real estate investing is FICO. Without a sufficient FICO score, one’s grandiose thoughts of becoming a real estate investor should be put on hold, but only temporarily, at least until your credit enables you to qualify for 90 percent to 100 percent LTV non-owner occupied loans.

On average, most lenders, prime or subprime, look for FICO scores in the 580-plus range at the very minimum. The fundamentals of successful real estate investing are built upon an above-average credit profile.

Unlike those ever-present late-night real estate infomercials that promise riches to anyone that has a heartbeat and a valid credit card, the real world of buying a home, especially as an investor, requires a higher threshold of due diligence upon oneself to maintain a good credit profile. You don’t have to have A+ credit per se, just above-average credit. As a former mortgage operations consultant, I worked in nearly every major city with other consultants, wherein our job was to re-underwrite, audit, and price out loans, both prime and subprime, for client banks securitizing their mortgage portfolios for sale, usually to Wall Street investors. This experience acquainted me to the do’s and don’ts of submitting a loan application. It also gave me insight into how lenders and banks think, and how they view the strengths and weaknesses of a buyer’s credit profile. Hence, here are the following items to consider before becoming an active participant in the real estate investment arena: 1.

Go online and sign up for a membership on one of those credit monitoring services. The cost is approximately twenty-five to fifty dollars and is well worth it. All three major repositories-TransUnion, Experian, and Equifax-have these services. 2. Know what’s on your credit report and immediately address those issues that will improve your score. Most online credit report providers offer a score simulator, which will give hypothetical scenarios on how the pay-off or pay-down of certain debts may improve your score. Take advantage of this “crystal ball” credit-management system, for it will provide you with a road map to recovery that will better align you with your real estate investing aspirations.

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