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How Can I Get Refinanced When I Have A Bad Credit Score?

By Edited Jun 18, 2015 0 0

There are a lot of ways to get a bad credit score. Some of them are quite obvious, like being behind on your mortgage or not paying your credit card bills on time, while others are less obvious, like applying for debt consolidation, but either way, the results are the same. Your credit score will turn out badly, and you'll have a hard time convincing financial institutions to give you low interest refinancing.

A lot of people face this problem, and believe it or not, it affects even the most affluent segments of society. However, getting refinanced despite having a bad or poor credit score is not impossible. The real challenge is getting a refinance plan that doesn't have a high interest rate. So if you are looking for refinancing, but at the same time, facing a very low credit score then the following tips may be of some help to you.

Think About Your Timing

If you had a higher credit score when you got your existing loan, you need to face the fact that you will not be able to save any money through a refinancing plan. The point being is that you shouldn't go into any deal where the odds are stacked against you. Even with the help of refinancing, the lowest interest rates are given to consumers who have the best credit ratings.

Considering how we're talking about people with bad credit scores, it goes without saying that a high interest refinancing plan is a problem that must be considered seriously. One way to deal with this problem is to be simply patient.

So before you jump straight into any refinancing plan, take a look your credit score and see if you can improve it even just a little bit. If you think your credit score will get better in the near future then it might be better to wait a bit. Once things have improved, you'll have access to better interest rates.

Look for Advice

Even if you know a thing or two about financial institutions, you will still need advice about your options, and the only people who can give you that advice are mortgage and credit card advisers. Although they might cost a little money, their advice can help you avoid unnecessary mistakes in the future, and that is what you always need to remember.
The good news is that legitimate mortgage and credit advisers will always tell their clients and potential clients how much they charge before they give out their professional services. On the other hand, if you can't find a mortgage or credit adviser, you always have the option of asking your mortgage broker for advice.

Choose an Appropriate Refinance Plan

After you have the advice you need, the next thing that you will need to do is look for the right interest rate. A few good examples include the Rate and Term Refinance Plan, the Short Refinance Plan, the Cash Out Refinance Plan, the Home Affordable Refinance Plan and the Interest Only Refinance Plan.

By the time you have chosen a refinance plan, it's important that you are thoroughly familiar with what kind of terms and interests you're facing. Remember also that if you have a bad credit rating, you will not be in a good position to negotiate better terms. In any event, consult your refinance adviser on which options he or she recommends, and make your choice based on that.

Moreover, you should consider your own particular situation when making your choice. Different plans have different advantages and disadvantages for different people. For example, a traditional cash out refinance plan allows you to get refinancing based on the existing market value of your home. It will also allow you to pull out part of your equity.
On the other hand, cash out plans only work if your home has appreciated in value since its purchase. If that is not the case then you should choose other refinance plans instead.

Negotiation Counts
After you have chosen a good refinance plan, it's time for you to start thinking about how you plan to negotiate the terms of your refinance plan. One of the best ways to do this is to purchase "points" to reduce your interest rate. In order to get started, you will need to check with your lender about the cost of purchasing points.

Also, think about asking your credit counselor to help you get your credit score up. Although credit counseling will not necessarily increase your credit score quickly enough to get better interest rates for your refinancing plan, it can open up other potential solutions. Assuming you have chosen a refinancing plan that lasts for a long time, these solutions can potentially help you save a lot of money.

Ask About the Risks and the Problems
After you know all the relevant stuff, it's time to ask your adviser about the problems and risks that you may encounter along the way. For example, refinancing your loans will lead to the loss of any equity that you've saved up because they will be used to secure your existing debts.
Also, you need to understand that people who have low credit scores are big targets for scams. This is obviously because people with poor credit scores are desperate. So as bad as the situation may be, it's important to double check any information that you might encounter with regards to your refinancing plan. If it sounds too good to be true then it probably is.

Clean Up Your Credit Score
Even if you do manage to get favorable terms from your refinancing plan, you should still make the effort to improve your credit score. Remember that refinancing cannot actually help you eliminate endless cycles of debt. They can only help you to fix your financial problems, but they can't eliminate it entirely. So it's up to you to make some permanent changes.
Even if your credit score cannot help you get favorable terms with your current refinancing plan, you never know how things might turn out in the future. As such, it's important to fix your credit score as early as possible.



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