Refinancing and your Credit Score

With interest rates hitting an all time low, this might be a good time to consider refinancing your house to lower your mortgage payment. Before I knew a thing or two about credit repair, I would always approach a mortgage broker and get some quotes on different mortgage types and pick the best one if it worked in my favor (like if it actually lowered my monthly payment). What I didn’t realize at the time was that the interest rate that was quoted was actually tied directly to my Credit Scores! With a little forethought, in just a few months you can significantly improve your credit score and lock in a rate sometimes 1/2 point to 1 point lower than if you did nothing to try and improve your score. In the life of your loan that could save you thousands or even tens of thousands of dollars. Is it worth trying? You betcha!

First check out my post on Credit Repair Monitoring for why you would want to use these services to get your credit report and scores. Once you have your credit report in hand you will want to formulate a plan to effectively raise your score as fast as possible. I suggest if you have a few credit cards to increase your debt-to-credit ratio quickly to an effective rate. This will do wonders to improve your score. Remember once you have assumed your new loan, you can pay down your credit cards again. This is a really effective technique to see a quick boost in your credit score.

Whenever you get a recent copy of your credit report, make sure to scan each section. And assuming you have a 3 bureau credit report make sure to really note the differences between all credit bureaus. Perhaps something erroneous is on there that can be disputed. If this is the case, the disputed information should be removed from your report within 30 days. That is the law the credit bureaus must follow according the Fair Credit Reporting Act section 611.

The first section of your report contains personal information like names, aliases, addresses, and social security number. The second section contains your trade lines like credit cards, loans, mortgages, etc., and contains information about current status (closed, open, satisfied) and history (paid on time, 30 day late payments, 60 day late payments, etc.). Section 3 and 4 contain information concerning public notices like bankruptcies, foreclosures and also how many times your credit has been pulled recently by lenders looking to approve you for a loan.

By following some of these ideas (or for a more complete perspective, take a look at The Credit Repair Blueprint Series), you can increase your credit score enough to qualify for a more effective interest rate sometimes 1/2 point to 1 point lower than having tried nothing.