Bad Credit? - Refinancing And Tips To Turn Things Around

Bad Credit? - Refinancing And Tips To Turn Things Around

by Michael Benifez

It's a common misconception that people with bad credit cannot get a loan or anything financed. That is nothing more than a myth.

Many companies specialize in loaning to these types of individuals and can help you with financing no matter what your credit rating is. So, refinancing with less than perfect credit isn't really a problem today. However, it helps if you know what you're doing.

The first step before going down the refinancing path and talking with any lenders is to find out what your current credit rating or score is. With your credit information in hand you’ll be in a much better position to know if you have bad credit and some steps you can take to improve your credit rating.

There are several indicators lenders use as Bad Credit or Bad Risk Indicators:

* If you have a FICO score of 620 or lower
* In the past 12 months you have had 2 or more 30 day delinquencies
* Or in the past 12 months, you have had a 60 day delinquency
* If there has been a foreclosure of a charge off against you in the past 12 months
* If you have filed for bankruptcy in the past 60 months or have been declared as bankrupt
* If your debt to income ratio is 50% higher (simply stated, your income can't cover debts)

Knowing your credit score is vital before deciding look at any refinancing options. Other areas that need to be looked at are your credit history as well as any collateral you're willing to put up and naturally, your current financial position which ultimately determines your ability to pay back any loans.

When looking for a lender try to find a company who can process your loan in house as opposed to outsourcing. This saves both time and money. It's also a good idea to seek out a loan counselor who can offer sound financial advice. Many companies now offer you the ability to check the status of your loan online 24/7. Shopping around for rates and terms will insure that you get the best deal.

Helpful Tips for Erasing Bad Credit

Having bad credit can have a negative affect on a number of things in your daily life. It may be the difference between not being able to get a loan or credit card on favorable interest rates or terms. It can also impede you from getting certain jobs. Working to maintain a good credit rating and working to erase bad credit information is vital to reduce the cost of living.

The most important thing to do in erasing bad credit is repaying old debts. Doing this means no more new negative reports on your credit history. The next step is to add some positive points to your credit report. This can be done several ways: open a new savings account, obtaining a new credit card and keeping the balance low or even refinancing with a home equity loan to repay old debts.

There are other things to consider if you are serious about getting rid of the bad credit stigma. Try to avoid bankruptcies, tax liens, and collections.

Take steps to reduce the number of credit cards you carry, consider a bad credit debt consolidation loan, and ask a friend or relative to co-sign a small loan or credit card that can help you to re-establish credit. If you do this make yourself accountable to them and let them help you turn things around.

It's also essential when working to erase the bad credit label to make your current payments on time and check your credit report on a regular basis for errors. You can do this once per year with no charge.

While cleaning up the habits of bad credit is possible, it does take time, sometimes as long as 7 years. And remember that while your credit score might rise slightly, it can take some time to wipe out the damage done over the years of bad spending habits.