Many homeowners are unaware of their credit score and how it can impact refinancing their mortgage. When applying to refinance your mortgage the lender will review your credit history and score. The outcome of this review will determine if your loan is approved and will influence the interest rate you will pay. Your Credit Score Mortgage lenders rely heavily on credit scores; this streamlines the process of approving loans. The mortgage lender will first run your credit score. If your credit score falls below the lender's minimum requirement they will not process your application and you will be denied. Figuring Your Score There are a number of factors on your credit report that determine your credit score. Credit scores range from 300 to 850. When it comes to credit scores, the higher your credit score the better your credit rating. It is not difficult to improve your credit score; you can get a higher score by keeping your credit card balances low and making your payments on time. Your credit score is based on your outstanding debts, the length of your credit history, making payments on time, and the number of credit inquiries on your record. Anytime you apply for credit and a lender checks your score this is counted as an inquiry. Your payment history is important because a potential lender wants to know if you will make your payments in a timely manner. Improving Your Credit Score There are a number of steps you can take to improve your score. Making your payments on time is the best way to boost your number. Your payment history accounts for nearly 40% of the calculation. Paying off your credit cards will also quickly improve your credit score. Taking the time to improve your credit score prior to refinancing your mortgage could save you a lot of money in the long run. |
