Mortgage Refinance Rates and Your Credit Score

By Michele Lerner
Mortgage Credit Problems Columnist

If you're looking for mortgage refinance rates, start by requesting a free credit report at AnnualCreditReport.com. Review their credit report for errors and see what lenders will see. Next, enter your information on this page to find the lowest mortgage rates for your home refinance.

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Bad Credit Refinancing and Your Credit Score

If you have a low credit score, you may need to apply for bad credit mortgage refinancing. Borrowers who need bad credit refinancing should be aware that they may not qualify for the best mortgage rates available to borrowers with good credit. For example MyFICO.com says that a $300,000 mortgage was recently available to borrowers with credit scores of 760 and above at 4.292% APR with a monthly payment of $1,483. Borrowers with a credit score between 620 and 639 would be more likely to pay 5.881% APR, for a monthly payment of $1,776, a difference of nearly $300.

While your credit score cannot be instantly improved, there are steps you can take to begin increasing your score and therefore increase your chances of qualifying for a better refinance mortgage.

Improving Your Credit Score

The most important thing you can do right now, after making sure your credit report is accurate, is pay all your bills on time. Sign up for automatic payments and online billing to make sure you don't miss a due date.

Pay off your debt as fast as you can, but do not close any accounts even when they have a zero balance. Lenders like to see that you have unused credit.

Aim to have your credit card balances at 30% or less of your credit limit.

If you need to reestablish your credit, open a new account and pay the balance on time. If you have friends or family with good credit, see if you can become an authorized user on their accounts. You don't actually has access to the credit, but its history will go on your credit report.

In addition to your credit score, qualifying for a bad credit refinance depends on your debt-to-income ratio and the equity in your home. If you have demonstrated improving finances through debt reduction and have a steady job and a recent history of on-time payments, try entering your information again on this page in a month or two to see if you qualify for lower mortgage rates. You may not need bad credit refinancing after all.



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