A bad credit mortgage company relies on a credit score provided by one or all of the credit agencies to determining where a borrower sits on the line between high-risk and low-risk. Equifax, Experian, and Trans Union keep track of each persons credit history and give individuals a score derived by several factors. These factors include not only payment histories of each credit card and loan but also how many inquiries have been made to view the individuals report.

In the past mortgage companies would not touch someone with a score below 620. Today that number has dropped to 500 which is pretty bad. The fact that an individual is a higher risk gives the mortgage lender incentive to charge higher interest rates and demand that the borrower pay PMI, a form of insurance that guarantees the lender won’t lose out if the borrower defaults. Higher interest rates and payment insurance make bad credit mortgages a profitable venture.

Companies are doing so well in fact that they often offer incentives such as instant pre-qualification, easy application forms and instant approval via the internet. They are everywhere online. Websites can automate many of the processes necessary to the approval process which makes it a hands off job for the lenders.

Companies that offer bad credit mortgage loans definitely exploit the automation capabilities of the internet and some use unscrupulous tactics to reel in those would be borrowers who are either on the fence or just shopping around. Fear tactics such as a great deal that will only last for the next 24 hours (of course the same deal is there a week later).

If you are looking for a mortgage online, shop around, don’t be swayed by the scare tactics and read the fine print. It is also very important that you know what your credit score is. It makes sense to first put in some effort to do whatever possible to bring your credit score up as much as you can before applying. Bad credit mortgage loans are not all that hard to get but be forewarned, many of these bad credit mortgage lenders will try to squeeze whatever they can out of you with the justification that you are a higher risk to them.