How to get a home improvement loan even with bad credit!

Home loans typically require good credit, stable employment and a low debt-to-income ratio. Don’t let this scare you if you have bad credit, though. If you wish to make improvements on your home, such as remodeling the kitchen, putting on a new roof or fixing the bathroom, you do not have to give up your plans because you have bad credit and insufficient capital to cover the expenses yourself. There are several ways that you can still get home improvement loans with bad credit.

Understand your Credit

If you want a home improvement loan, you should do a credit report check to determine what you are dealing with before contacting banks. The credit report will allow you to view your credit scores and give you a thorough understanding of the credit you have outstanding and what is being reported against you. This allows you to start to repair your credit, little by little. If you see any inaccuracies on your report, those should be handled right away with the creditor or the credit bureaus directly. Any outstanding credit that you have should be taken care of as soon as you can and all future bills should be paid on time.

Determine your Assets

Home improvement financing is typically easier to apply for than a standard mortgage to purchase a home because you have the collateral to give up if you were to default on the loan. If your house has a large amount of equity in it, the bank uses that as collateral and views your application as less risky than one that has little to no equity in their home. Understanding the value of your home and the balance of your first mortgage will allow you to determine if you have adequate equity in the home that will work in your favor at the bank.

Steady Job

As with any loan, you need to show that you have a steady income. If you have bad credit, the more stable your employment history is, the more likely you are to get approved. Banks look at the places that you have worked over the last 5 to 10 years. If you have had many jobs during that time, especially if they are in varying industries, it could reflect poorly on you. On the other hand, if you have had the same job or the same type of job in the same industry for many years, your job stability will play a favorable role in your application for home improvement loans with bad credit.

Get a Cosigner

If your credit is really bad and it has not been very long since the latest reporting of late payments, bankruptcy or other credit blemishes, obtaining a cosigner could help your case. If the person willing to go on the loan with you has good credit, it could offset your blemished credit, allowing you to get the loan to make improvements on your home. It is important for the cosigner to understand that he or she is as legally responsible for the loan as you are in the event of default.

Consider a Credit Union

If your place of employment gives you the benefit of the use of a credit union, check with them about the chance of getting home improvement financing despite your bad credit. Many times credit unions will listen to the personal stories behind the credit mistakes and extend credit based on what they know about you, rather than what your credit report says. If you show good faith and have a real story about why you ran into trouble in the first place, they might grant you credit.

There are several ways to obtain home equity loans with bad credit. It takes a little creativity and sometimes a little extra time, especially if your credit needs to be repaired after you view your credit scores. Understanding what your credit report says and ensuring its accuracy is essential to the success of obtaining credit to make home improvements. Once you know what you have to do, you can get started down the right path that will enable you to make the improvements that your home needs.