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How do I Refinance a Mortgage with Bad Credit?

Article Details
  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 20 January 2020
  • Copyright Protected:
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    Conjecture Corporation
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While refinancing a mortgage is definitely easier if you have good credit, it is possible to refinance a mortgage with bad credit. It may, however, be harder for you to get the lowest possible rates on your refinance with a low credit score. To refinance a mortgage with bad credit, you may need to take steps to clear up bad credit; this may involve disputing inaccuracies on your credit report and paying off debts. Once you’ve done this, you can compare lenders based on the rates and terms they are willing to offer given your credit score. If you find that you cannot secure decent rates for your refinance, however, you may do well to wait until some of your older entries drop off your credit report.

Clearing up errors on your credit report is essential when you want to refinance a mortgage with bad credit. You may find that errors on your credit report have been bringing your credit score down. Fortunately, you can dispute these inaccuracies with your jurisdiction's credit bureau. In most cases, credit bureaus will take 30 days to verify the debt. If the debt can't be verified, the credit bureau will typically remove the error from your report.

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You may also try to negotiate with the companies you owe to change negative entries on your credit report. In such a case, you would offer to pay the debt and ask the company to remove the adverse information from your report. For example, a creditor may be willing to report your old debt as paid as agreed instead of charged off. Creditors do not have to agree to do this, however, so it’s important to hold firm to this request as a condition of your repayment agreement. If you do manage to come to an agreement with your creditor, you’ll need to get the agreement in writing before you hold up your part of the bargain.

When you want to refinance a mortgage with bad credit, it is important to avoid current mistakes that could worsen your credit score. This means paying your bills on time. You may also do well to pay your credit card bills down as far as possible. You should not close your credit cards, however, even if you have no intention of using them. Closing your credit card accounts may hurt your credit score.

After taking steps to improve your credit score, you may do well to contact mortgage refinance lenders and compare the rates and terms they can offer you given the fact that you have poor credit. You’ll typically want to choose the lender that offers the lowest rate and the most attractive terms. You may, however, come to the conclusion that you cannot secure the rate you want with your current credit score. If that is the case, you may do well to wait a while and continue to make efforts to improve your credit. With time, old credit report entries will drop off, and your current credit habits may figure more prominently.

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