You've got a couple of 30-day late payments on your Visa card, and once you
forgot to pay the phone bill. Will you be able to get a loan? Are you supposed to pay for
your mistakes forever?
What You Want: Tampa mortgage broker Chris Munzo says he used to have just one
lending source for poor credit risks. But now that the market is infinitely more
competitive, "I have six or seven lenders aggressively soliciting my [poor] credit
business," he says.
One reason: Lenders have finally figured out that most people with 20% to 30% equity in a
home aren't going to walk away from it, even if their credit is bad. The other reason: Many
lenders now have systems that help them figure out how much of a risk a person actually
poses -- and so can price their loans accordingly. It's called credit scoring. At
ContiMortgage, for instance, you're an A-minus if you had one late mortgage payment in the
past 12 months and two late credit card payments, a B if you had three late mortgage
payments in the past year and two late credit card or car loan payments, and a C if you had
several late mortgage and credit card payments in the past year -- and a bankruptcy anywhere
in your past.
Where to Shop: All lenders are more willing to write loans for bad credit risks these
days, but your best bet may be a mortgage broker. "They used to call it 'hard money,' and
mortgage brokers are where you had to go to get it," says North Carolina broker Christopher
Cruise. "Today, you're generally still best off going to mortgage brokers for B, C and D
credit." If you want a fixed rate, be sure to try a mortgage banker such as Household
Finance or Beneficial Mortgage. These days, they'll take just about anybody.