‘Bad Credit’ refers to an individual’s credit history; basically it indicates the borrower has a high credit risk. When a lender is deciding to approve a loan for an individual, they look at borrower’s credit history to study if he or she is a good or bad risk. If they are a good risk, it means the lender has a fair chance of getting their money back and if they are bad risk, the borrower may not be able to pay their debts on time.
A borrower’s credit history is dependent on a number of factors such as the amount of money he or she is owed, the available credit and the timeliness of payments. Having bad credit makes it very costly for borrowers to obtain loans.
Normally, lenders don’t seem comfortable lending loans when the borrower is partnering with his brother or sister for a joint home loan. Instead, if the borrower is partnering with his/her parents, husband/wife, son/daughter, banks normally accept the joint home loan application. All depends on from bank to bank, if the borrower is partnering with his sister/brother, he/she should approach directly to lenders. Generally, banks do not lend to sisters as co-applicants, only the brother can be included as co-applicant. In very rare scenarios, by looking at the borrower’s credit history lenders may approve the loan but in general, they refrain from lending.
Yes, it does affect your joint home application when your partner has a bad credit.
Banks are guided by the National Credit Act in the granting of credit to applicants. So if one of the joint applicants has bad credit under his/her name, it can affect the outcome of a joint home loan application. The bank’s credit decision is dependent on a number of factors such as not paying debts in a timely fashion, including the strength of the remaining applicant’s information, and how severe the listings are on the credit record of the second applicant.
For instance, if the borrower has a once-off default on a small account and which can be explained, it will not seriously affect a borrower. A borrower with bad credit record will have many defaults over a period of time in their credit history. Each bank has a different set of process to check eligibility and assess applications. The extent to which bad credit will affect a joint home loan process will vary from bank to bank. However, if either or both of the applicants have been blacklisted, the banks will not approve the loan as a joint home loan application. As per the banks’ credit policies bound by the National Credit Act, states that no person who has been blacklisted may be granted credit.
In cases, when you are considering with a partner who has a bad credit score to apply for a joint home loan, it’s always a good idea to get pre-qualified before applying for a home loan. Once you are assessed for prequalification, a credit check will be run against your name, your payment history to see you have payment dues or made payments in a timely manner, and your overall affordability will be calculated. Apparently, you can also try submitting your joint home loan applications in multiple banks to make your chances higher.
Here are two ways on How to get a home loan with Bad Credit:
Work with a reputed broker
Here’s the first one. You got to work with a loan broker that is brokering out to many different banks and is doing high volume. Let’s talk about why. If you go directly to a bank and you walk into the bank that you work at, they’re always going or want to offer you and pre-qualify you for some type of loan. But the bottom line is that’s just one bank, and not all banks are the same. They weren’t all created equal and they have different rules. So I recommend number one, going to a broker that works with 20, 30, 40 different banks. Because there are banks out there that work with people that do have bad report credit.
Start doing credit maintenance
The second thing I want to tell about is what you will do if you have bad credit to actually get it fixed. This strategy really comes down to doing some credit maintenance. Sometimes we’ve got hiccups, sometimes we’re late on a payment and then all of a sudden we say Hey ‘I’ve got to get serious about qualifying for a loan.” Do some credit repair or maintenance and make your credit balances in a timely manner to improve your credit scores and re-apply for a home loan. Make sure you say your story to the bank before you start making the payment, this will keep the lenders in the loop that you missed your payments due to some reasons and now you are paying back and in future, if you need a home loan from the same bank, there are very positive chances. Remember investing in a home is one of the biggest investment one can ever make so make sure you keep your credit history good.