When refinancing your home mortgage loan, you’ll get the lowest interest rates by taking a few preliminary steps.
Begin with checking your credit report for errors. Experts say that at least 75% of all credit reports have errors. Some are minor, but some are serious and can hurt your scores.
Be sure to check for old accounts that have been paid in full but still show up – and old collections that should have been removed. Collections are supposed to come off your report after 7 years, but it doesn’t always get done.
After you’ve checked for financial mistakes, check your name and address. Incorrect spelling or wrong addresses won’t hurt your score directly, but consistency looks better to lenders.
If you find errors of any kind, write the credit bureau and ask them to make the corrections. Be sure to give full explanation, and be polite.
If you have some high credit card balances, pay them down as much as you can, and then transfer balances so that you are not using more than 30% of your credit line on any one card. If you can get it down to 20% or less, that’s even better.
Now for some things you should not do:
Don’t close any credit card accounts. The more credit you have available compared to the amount you’re using, the better your scores.
Don’t pay off your car or school loan. The more kinds of credit you are using responsibly, the better.
Don’t apply for any new credit card accounts – or take on any other kind of credit obligation – until after your refinance is final.
And here’s one that might shock you: Don’t pay off an old debt that has gone to collections. Say you were in dispute over a health club account several years ago and decided you just weren’t going to pay it. Since then it’s gone into collection and shows up as a black mark on your credit report.
If you decide to pay it now, it will show as new activity, and count more toward determining your credit score than if you just leave it alone and let it be past history.
You can gain points by contacting the collection agency directly and offering to pay the account if they will remove it from your credit report entirely. If the first person you speak to says no, ask to talk with a supervisor.
The first step is to read your credit report – order yours right now.
Author: Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.
