How Can I Repair Bad Credit by Refinancing My Home Mortgage?
People who have bad credit are always looking for quick ways to improve it, as they should. A credit history is a very powerful thing in today’s culture, and a poor credit history can have negative effects in every aspect of a person’s life. It can affect whether one gets a vehicle, gets a home, can start a business, and even whether one can get a job. In today’s depressed economy, it is perhaps easier than ever to improve one’s bad credit quickly: simply by refinancing one’s home.
Reduce the amount of money that one owes over the life of the policy
The best thing that refinancing does for one’s bad credit is that it reduces the amount of money that one will have to pay over the life of the policy. Mortgage rates are at an all-time low right now, between 3.5 and 4%, and a refinance is almost guaranteed to reduce the amount that one owes. Since the amount of money that one owes with respect to his or her income is a very large part of the credit score calculation, this alone is likely to improve one’s credit score.
Reduce the percentage of available credit that one is using
Because of the reduction in the amount that one owes, one is also likely to have more available credit. A mortgage is a line of credit, the size of which is determined by the value of one’s house, and since this is a refinance, it is very likely that one will be using less money out of that line of credit. This is also part of the formula for determining one’s credit score.
Get one’s record back on the books of the major bureaus
And, finally, refinancing will show the major credit bureaus that one is still around and borrowing. As long as one keeps up with his or her payments this will improve his or her credit score, since a large part of the calculation is determined by how old transactions are.
Therefore, if one wishes to improve or repair his or her bad credit, refinancing a mortgage is actually a very good idea.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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