Homeowners Refinance 1Homeowners Refinance 2

How To Get A Home Refinance With Bad Credit

Things may still be rocky with the economy, but one silver lining is that mortgage rates are still near historical lows. Everyone should see if they can take advantage of these low rates. If you are like many Americans, though, you may have hit a few bumps in the road and have made a couple of late payments.

You may wonder if you can even quality for a home refinance with bad credit. There are still options, but being informed and prepared can mean the difference between “approved” or “declined”.

Home Refinance With Bad Credit – Get Your House In Order

Immediately get your house in order – your credit house, that is. Obtain a copy of your credit report to determine what your score is. Annual reports can be obtained through any of the reporting agencies (Trans Union, Equifax, Experian). Scores range from 350 – 850. A target number for easy, well-priced credit is over 700, but the national average is 680.

Loans are available to those with poorer credit, but the rates and fees on these loans are typically a bit higher than those with good credit. Go through your credit with a fine tooth comb. If there are any inaccuracies, contact the creditor(s) listed and get it cleared up. If you have credit cards that aren’t being used, consider closing them out. Having credit available to you is not a bad thing, but having too much unnecessary revolving credit available can hurt your score.

Home Refinance With Bad Credit – Ways To Improve Your Credit

First – Pay down credit card debt. Creditors consider this type of debt to be very risky. It’s easy to make mistakes and inadvertently dig yourself into a hole with credit cards. Put a plan in place to make online payments on credit cards with every paycheck.

Don’t wait until the monthly statement comes, you might spend the money from your paycheck before then. Showing that you have a plan in place will be a positive to a mortgage lender. By the way, pay everything on time. The most recent 12 months of activity on your credit makes up 40% of your score. One late payment can drop your score by 50 – 125 points.

Second – Look at your credit card balances compared to the total amount available for you to use on each card. For example: You have a $2,000 balance on a card that has a maximum available of $3,000. You don’t want to carry balances on cards more than 50% of what is available. In this example, you would want to pay down or transfer at least $501 of the balance to a different card. This ratio of balance to availability makes up 35% of your credit score.

Third – Don’t allow any lender to order your credit report until you’ve told him/her your score and confirmed that they have a loan to fit your needs and budget. Too many iniquiries on your credit report can affect up to 10% of your credit score.

Home Refinance With Bad Credit – Wrap Up

Continuing to follow these steps to recovery will not only help on your way to a home refinance with bad credit, but will also make obtaining future well-priced loans a breeze. Raise your score and lower your blood pressure starting today!