Most homeowners aren't aware their current credit rating and the effect it will have if they decide to refinance their home loan. Mortgage lenders will always review your credit rating and base your interest rate, and other terms and conditions on it. Therefore it is crucial you understand how your credit score works and effects your refinancing.

Your Personal Credit Rating and History

A big thing that mortgage lenders and banks rely on when approving and deciding refinance terms is the homeowners credit score, this makes it much easier for them to weed out “risky” borrowers. The mortgage lender will often run your credit score quickly and see what and if you qualify for anything at all. If your credit rating and history happen to be below the lender or banks requirements you will be denied the chance to refinance your home mortgage.

Tips to Figure out Your Credit Rating

There are a few things that play a heavy role in determining your credit score. A credit score can be anywhere from 300 all the way to 850. The higher the better which means better interest rates, terms, and conditions. Improving your personal credit rating is not hard to do. You can do this by paying bills on time and paying off any remaining balances you may have.

Playing a big factor in your credit rating is are any outstanding debts you may have, length of your credit history, payments being made on time, and the number of credit checks run on you. Payment history is especially important as your lender wants to know that you will always pay them at least something.

How to Improve your Credit Rating for a Home Mortgage Refinance

There are a lot of different ways you can improve your credit rating. The best way though to do this is to make all your bill payments on time every month. This accounts for nearly 40% of your overall credit rating and maintaining payments can quickly add to your credit score.

Improving your credit rating, even a little bit before refinancing a home loan can save you a lot of money when it comes down to the interest rate, terms and conditions of the new home loan.

-M Petrone

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