Refinancing is when you replace your current mortgage with a new one, majority of the time the new one will have a lower interest rate. There are plenty of reasons why anyone would investigate refinancing their mortgage. For those that have a good credit score, this is a straightforward process. However, when it comes to refinancing when you have a poor credit score, it can be a little more difficult.
How Does Credit Score Affect Refinancing?
Before you get you can refinance your loan, lenders will look at your credit history. They will look at your payment history, money that is currently owing, the amount of time you have had credit history and what you are applying for.
Typical Refinancing Process
When you are looking to refinance, the first step is all about choosing a lending institution. You should shop around for deals during this process. Once you do find a suitable lender you’ll need to provide them with bank statements, credit history, past tax returns and other documents. The lender will then assess if you are able to repay the loan or not.
Tips for Refinancing with Bad Credit
Here are some steps you can take:
- Have some significant assets on hand. By having some substantial holdings on hand, the bank will a little more forgiving of a low credit score.
- Find a co-signer. By having a co-signer with a high credit score, this will reduce the amount of risk on the bank’s end and will more than likely to approve your loan. It should be noted that if you are unable to pay your loan, the bank will get the money from the co-signer.
- Boost your credit. By clearing as much of your credit card debt as possible and paying your bills on time, you have the potential to raise your credit score by about 50 points within a couple of months.
Whatever the reason for refinancing, don’t let bad credit stand in your way. With the information in this blog, you too can help to improve your credit and be on your way to refinancing your mortgage.