Do Hard Money Lenders Look at Credit? (we end the debate here)

Good topic, huh?

This is a question we are asked about 50 times per day and it is a topic constantly being debated in the real estate investing community.

I will answer this question with a question- does the hard money lender want to own the property?  And I’m not being a smart aleck when I ask that.  Here’s why:

**Some lenders don’t care if someone defaults and they have to foreclose.  They might even want to own the property. (There are still lenders out there like this, mostly old school guys.)

**Some lenders don’t want defaults and just want a performing loan portfolio.  (We are this type of lender.)

If the lender doesn’t care if the loan performs or not, no reason to look at credit.  If they want only performing loans, it is important to analyze the credit history.  That may sting a bit, but it’s the truth.  If someone doesn’t pay any of their bills, they aren’t going to pay us either.

That being said- a borrower doesn’t have to have perfect credit history and an 800 score.  Of course not.  Plus if they have a lot of cash the credit becomes less important, but that’s a separate discussion.

So I guess the easiest answers is-  we look at credit, but it’s not the most important thing.  It’s a factor, but not the only factor.  Good enough answer?

To learn more about how hard money lenders underwrite loans, get the FREE report on the right hand side of the page “7 Steps to Guaranteed Hard Money Loan Approval.”  If you ever plan to apply for a hard money loan this is a “must have.”

***I would like to point out that this policy on credit applies to the purchase/rehab scenario.  If someone needs a bridge loan on property owned free/clear, credit is typically not a factor for any lender, but the LTV will be lower.

What do you think about this?  Feel free to comment below.

Happy Investing!


  • Dennis

    You should not call yourself a HARD money lender. Yes, I am an old school guy and Hard money was always synonymous with EQUITY not credit. Over the years I have seen hard money loan from 50-75% LTV without credit but mostly in the 60-65% range. If you need to consider credit call yourselves “private lender” since that term has no specific meaning in the biz except that you are not an institution. That would really help to clear up the confusion.

    • Chris

      Dennis, I am glad you said that! That’s what I was waiting for! People say that to us all the time. The fact is this: whether you call yourself a “private” or “hard money” lender, you have certain criteria you look for in a loan. Everyone underwrites differently. Some lenders like low LTV, some high credit, some lots of cash, etc. There is no standard definition for how hard money lenders underwrite. The easiest to way to find out is simply to ask. Hope that helps!

      Ps- It does no good to tell a lender that how they underwrite is wrong. After all, we know what goes into default and what doesn’t 🙂

  • Trent

    I get this question all the time too, debating with potential borrowers about what we are “not suppose to look at” if we call ourselves hard money lenders. After what we (lenders) have been through the last several years you can’t tell me it’s wise to lend tens, or hundreds of thousands of dollars to someone who, by their credit report, can’t even pay their cell phone bill, regardless of the equity position. If you’ve been in this business for any amount of time (24 years for me) you could see how one borrower can turn your business life upside down and it usually comes down to credit… and sometimes the greater the skin in the deal the deeper they dig in their heals.

    Bottom line, protect yourself and go with a hard money lender who will look at your credit report, they want you to succeed.

    From a Private Hard Money Lender

    • Chris

      That’s good stuff, Trent. I couldn’t agree more, on a few points. Thanks for the comment.


  • maggie

    On the other hand, with the recent economy, many good borrowers have fallen on hard times. I’m one of those – my husband & I both had good jobs, lost them both, and now I can’t borrow anything, although thru it all I’ve kept up all 7 of my properties. I would like to invest more, but can’t borrow squat. So look at credit or not, I’m a successful investor, whether I’m a successful creditor or not. I’ll likely go with someone who will not look at credit.

  • Gary P

    Maggie, keep in mind that just because hard money lenders LOOK at credit, they aren’t going to kill the deal because of it. Banks are looking at your HISTORY, but (at least for me), your credit SNAPSHOT and how you HANDLED the adversity is more crucial.

    If you defaulted on credit cards, but paid all your mortgages on time and now have a steady income again, a reasonable HML will likely be okay with that, even with a crappy current FICO. On the other hand, three foreclosures (including your home), a withdrawn BK to play the system, and several credit cards still in charge-off or judgements after two years is going to be tough to approve.

    A LOT of solid investors got hit with credit dings in the past three years, it’s almost expected if you were actively in the game. The question your credit report can answer is: How did you solve and prioritize your cashflow & debt problems? Did you learn something, or are you likely to get in trouble again?

    Your HML might also be able to give you advice on cleaning up your credit report, especially if a long-term refi is one of your exit strategies, the HML wants to ensure you CAN get cashed out on the back end (unless, as Chris mentioned, they don’t at all mind taking your property back and losing you as a customer when the refi fails…)

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