Your credit report is much more than a score, it’s a full story of your overall credit health. While we do have credit score minimums at Alpha Funding Solutions (ranging in the 600’s), we are more specifically looking at your credit health. When it comes to approving a borrower for a fix and flip loan, some things our underwriters look for include on time payments, lines of credit that have been in good standing for a period of time, and multiple lines of credit that aren’t at their max amounts.
When looking at a new borrower’s credit health, we want to understand the big picture. A 720 credit score with minimal credit usage leaves our underwriters with not much to go on as far as understanding a potential borrower’s payment track record. Our fix and flip loans require “interest only” payments during the length of the loan, however we want to be sure that each borrower is able to fund those payments on time.
On the other hand, a contractor that has a lower score but multiple lines of credit for supplies and no late payments can show us a different story.
Hidden collections on a credit report can often be an easy fix but something that can affect a score. These simple examples are why we seek to understand each investor and their unique story through a deep understanding of the credit report as well as through our borrower interview.
How does a credit pull affect my credit score?
When you submit your application to Alpha Funding, it includes a credit and background waiver, a personal financial statement, and a fix and flip project summary. Our processing team does conduct a hard credit pull from TransUnion. If needed, we will look at Equifax and Experian as well. The credit inquiry is in good standing with Alpha Funding for one year and would only need to be pulled again if another fix and flip, buy and hold, or new construction deal was initiated after 12 months.
Inquiries may or may not affect your FICO score. How a hard pull affects your credit score is determined by a number of other variables including number of recent inquiries, time since the opening of your last account, and number of recently opened accounts. For some, a hard pull may result in a score drop of several points while others will experience no change at all. Read more about the effects of credit inquiries at myfico.com . Once in a loan with Alpha Funding, our loans are not reported to credit bureaus and therefore, have no impact on your credit score.
In summary, at Alpha Funding, we make holistic and consultative decisions. We are solution oriented and seek to understand each borrower individually and each deal as its own unique fingerprint. Our fix and flip loans are created with flexibility in mind so that each borrower gets what they need to succeed in the real estate investment world.