By Karen Lawson
Mortgage Credit Problems Columnist

Bad credit can cause problems beyond challenging your household budget, and credit card debt can lead to bad credit if not managed properly. The good news for homeowners is that you may be able to refinance your mortgage loan for enough to pay off credit card debt.

Credit Card Debt and Bad Credit

Starting out with a couple of credit cards seems harmless enough, but the convenience of using credit cards can lead to carrying revolving balances. A revolving balance occurs when you pay less than the full amount owed on a credit card account during a billing cycle. A balance is carried forward, finance charges accrue and are added to your balance. Here are some ways revolving debt causes problems for those with bad credit:

• High APR: The annual percentage rate, or APR (used for both mortgages as well as for credit card interest rates), charged for credit cards can be very high, sometimes in excess of 25%! As finance charges are added to your unpaid balance, it can be difficult to reduce that balance if you're making small monthly payments. This can lead to increasing, rather than decreasing, your debt.
  
• Higher APR for cash advances: If you have bad credit, you may use cash advances when short of cash. The APR for cash advances is typically much higher than the APR for purchases, and it may also include transaction fees. This is an expensive way to borrow money, and can cause your credit card balances to increase very quickly.
  
• Irregular due dates: Credit card companies may not bill on a consistent monthly basis. If you check your due dates, you'll likely find that payments are due within two to three weeks of receiving your bill, and that due dates vary. This increases the possibility of late payments. Late charges can be more than minimum payment amounts!

Refinancing to Repair Bad Credit
Cash-out refinancing pays off your existing mortgage loan and provides additional funds for getting rid of debt. If approved, you can roll your credit card debt into your mortgage amount, and make one monthly payment. The APR for refinancing, which includes lender fees, closing costs, and your mortgage interest rate, is typically lower than the APR for credit card bills.If you can qualify, refinancing your mortgage loan to eliminate high-cost debt can help you improve your credit.

Other Recommended Refinance Articles

• Five ways to know if you should refinance
• 5 tips for prospective home refinancers
• 2 ways refinancing can help your finances