Credit scores are numerical expressions based on a statistical analysis of an individuals credit files. It represents the credit worthiness of the individual and is usually based on credit report information that is supplied by credit bureaus.
Almost all lending companies use credit scores to check the degree of risk associated with offering refinance. It is also used for deciding who qualifies for refinancing and who does not, what interest rates will be imposed and what the amount of credit will be. Apart from lenders and banks, organizations like mobile companies, government departments and employers use credit scores.
Tips to Improve Your Credit Score for Refinancing
Refinancing is taking a loan out to pay back a previous loan. For this purpose you need to have a good credit score so you can get the lowest possible rates. The following are the ways by which you can improve your credit rating:
- Negotiate with lenders for paying off old debts - By paying off your old debts you can develop a bit of credit worthiness. You can ask your lenders to reduce the loan amount or approve lower payments at higher rates of interest.
- Close unused accounts - Close all accounts that yield nothing but are just a burden and give up all credit cards that you do not need as these things contribute to your debt.
- Get professional help - A financial expert can help you raise your credit score considerably by chalking out a financial plan that will prove beneficial.
- Check for flaws - There can be mistake in calculation of your credit score so you should check your credit score annually. There can be an error in calculating your number or due to identity theft.
- Avoid foreclosure - Foreclosure remains in your credit history for up to seven years. Try to sell your house yourself rather than having it foreclosed on. Selling off for repaying your mortgage is better option.
- Be proactive - You should always be proactive about your credit history. Being judicious from the beginning can help you keep a high refinance credit score.
If your credit scores is good enough to give you a good rate of interest for refinancing, you can either go to a hard money lender (which is equity driven and for whom credit score is not of much importance) or explain your financial condition to the lending company. It is possible that the company will approve refinancing your loan on the basis of genuine explanations. If you are suffering from adverse conditions for a long time due to which you are not able to repay the loan, the company may approve your refinance loan application.