One of the most common questions from investors considering their first hard money loan is, "What credit score do I need?" The answer is more nuanced than a single number. Understanding how hard money lenders evaluate borrowers helps in approaching the process with realistic expectations.
Hard Money Is Not Conventional Lending
To understand how credit factors into hard money, one must first understand how it differs from conventional mortgage lending. When applying for a conventional mortgage, the lender's primary concern is the borrower: their income, employment history, debt-to-income ratio, and credit score. The property matters, but the underwriting is fundamentally borrower-focused.
Hard money lending flips that equation. The primary focus is the deal. What is the property worth? What will it be worth after renovation? Does the borrower's plan make sense? Is there enough equity in the deal to protect the lender's investment? The borrower's financial profile still matters, but it's secondary to the quality of the deal itself.
This is why hard money exists. It serves investors who may not qualify for conventional financing--whether because they're self-employed, buying a property that doesn't meet conventional standards (like distressed properties), or because they need to close faster than a conventional lender can.
Typical Credit Score Minimums
Across the hard money lending industry, credit score minimums typically fall into these tiers:
| Credit Score Range | Typical Terms | What to Expect |
|---|---|---|
| 680+ | Best rates and highest leverage | Up to 90% LTC, competitive interest rates, streamlined approval |
| 620-679 | Standard terms with minor adjustments | Slightly higher rates or lower leverage, but still very fundable |
| 580-619 | Possible with strong deal and compensating factors | Higher down payment, higher rates, deal quality must be excellent |
| Below 580 | Difficult but not impossible | Requires significant equity, strong experience, or additional collateral |
Harvey Capital Funding does not have a hard cutoff that automatically disqualifies an applicant. Deals have been funded for borrowers with credit scores in the low 600s because the deal was strong, the borrower had experience, and the numbers made sense. Conversely, deals have been passed on from borrowers with 750+ credit scores because the deal itself didn't work. The credit score is one data point, not the whole picture.
What Matters More Than Your Credit Score
When a lender evaluates a loan request, here is what they are actually looking at, roughly in order of importance:
The deal itself. What's the purchase price relative to the as-is value? What's the projected ARV, and is it supported by recent comparable sales? What's the rehab scope and budget? Does the loan-to-ARV ratio give the lender adequate protection? A deal with a 65% loan-to-ARV ratio is fundamentally safer than one at 75%, regardless of the borrower.
The borrower's plan and experience. Has the borrower done this before? If so, how many deals? What were the outcomes? A borrower with ten successful flips and a 640 credit score is a much lower risk than a first-timer with a 740. Experience demonstrates the ability to execute the plan--and execution is what determines success.
The exit strategy. How will the loan be repaid? If it's a flip, is the resale market strong for this property type and location? If it's a BRRRR deal, can the borrower qualify for the refinance? A clear, realistic exit strategy is essential. This is where credit becomes more relevant, because a credit score will matter for refinancing with a conventional lender.
Skin in the game. How much of their own money is the borrower putting into the deal? A borrower who invests 15-20% of the project cost has strong alignment with the lender. If the deal goes sideways, they have real money at risk, which means they are motivated to make it work. Higher down payments can often offset lower credit scores.
Liquidity and reserves. Does the borrower have cash reserves beyond the funds for the deal? Unexpected costs arise on almost every project. Having reserves to handle these situations without defaulting on the loan is important.
What Lenders Look for in a Credit Report
Even though the credit score isn't the primary factor, lenders do pull credit and review the report. Here's what they look for beyond the number:
Recent derogatory events. A bankruptcy that discharged five years ago is very different from one that discharged six months ago. Recent foreclosures, short sales, or charge-offs raise more concern than older ones. Lenders want to understand the story--was it a one-time event caused by specific circumstances, or is there a pattern?
Payment history on existing obligations. Are payments current on existing mortgages, car loans, and credit cards? Consistent on-time payments demonstrate financial responsibility, even if a score is lower due to high utilization or limited credit history.
Outstanding judgments or liens. Active judgments or tax liens can complicate the closing process and may need to be resolved before a loan can be funded. These aren't necessarily deal-killers, but they need to be addressed.
Tips for Investors with Lower Credit Scores
If an investor's credit score is below 650, here are practical steps to strengthen their position:
Bring a stronger deal. The better the deal, the more flexibility lenders will offer. A property with a 60% loan-to-ARV ratio is easier to fund than one at 72%, regardless of credit. Focus on finding deeply discounted properties with clear value-add potential.
Increase the down payment. If a lender typically requires 10% down, offering 15% or 20% reduces the lender's risk and demonstrates commitment. This is often the single most effective way to offset a lower credit score.
Partner with an experienced investor. New investors with lower credit might consider partnering with someone who has a track record. Their experience and potentially stronger financial profile can help secure funding while building a history.
Be transparent. Do not hide credit issues. Explain the circumstances, show what has been done to address them, and demonstrate an upward trajectory. Reputable lenders appreciate honesty and may be willing to work with borrowers if the overall picture makes sense.
How Harvey Capital Approaches Credit
The approach at Harvey Capital Funding is simple: fund good deals for capable borrowers. Credit is part of the evaluation, but it's not the whole evaluation. Too many investors get discouraged because they assume their credit score disqualifies them from hard money lending. In many cases, it doesn't.
If you have a deal you're considering and are unsure whether your credit profile will work, the best thing to do is reach out. The team at Harvey Capital Funding provides straight answers. They can determine if a deal is workable and, if not, explain what would need to change for the future.