Now that you know what “bad credit” is considered to be, lets chat about refinancing if you have bad credit.
Your credit score is one of the biggest elements to the pricing of your mortgage loan. If you have bad credit, you can expect to have a significantly higher rate than what is advertised. Like we mentioned last week, that reason for that is that you are a much greater risk for not making your mortgage payment. When a borrower refinances, they are looking for a lower interest rate on their mortgage or shortening their loan terms.
If you have bad credit, refinancing does not make much sense. It would be highly unlikely that a lender would offer you better terms. (For those of you who may be in the other boat, the opposite holds true, too! If your credit has improved since you took out your mortgage initially, refinancing might be a good idea!)
Don’t get sucked into the “advertised on TV” or “advertised on the internet” refinancing tactics that are out there. These advertisements are usually for “well-qualified” borrowers. If you have bad credit or close to it, you would not fall into that category. Once you mention that your FICO score is 640 (or below) your interest rate will skyrocket and refinancing will not make any sense.
Last week, we share some ideas and things you can do to increase your credit score. If you need any more ideas, please reach out to us. We would be happy to help in any way possible!