Want to get your hands on today’s best refinance rates but don’t want to pay for a new mortgage loan? While it’s true that the fees you pay make or break the deal you’re getting there are steps you can take to make sure you’re getting the best refinance rates. Here are several tips to help you find the best refinance rates while avoiding unnecessary lender and junk fees.
Want the Best Refinance Rates? Start Here First.
Before you start shopping for the best refinance rates it’s important to make sure your financial affairs are in order. If you’ve already started shopping for a new mortgage and are finding the refinance rate quotes you’re getting are higher than what lenders are advertising the likely culprit is your credit score.
The first step in getting your financial fairs in order starts with your credit report.
How to Get Free Credit Reports
Congress passed a law several years back requiring the credit bureaus to provide you free copies of your credit report every year. You won’t get a credit score with them but you can get your free credit reports by registering with AnnualCreditReport.com.
Once you’ve accessed your credit reports you’ll want to carefully review them for errors. If you find mistakes each of the three credit bureaus (Equifax, Experian & TransUnion) has an online process for disputing mistakes.
When you’re certain that your credit reports are accurate you can focus on your credit score. Most credit unions offer low cost credit monitoring services that allow you regular access to your credit score if you’re a member. How high does your credit score need to be? Most lenders base their advertised rates on having a score of 720 or better.
Which credit score do mortgage lenders use? Lenders typically use your FICO score, named for the Fair Isaac Company that created credit scoring.
You’ll find that you have three credit scores based on your credit reports from TransUnion, Equifax and Experian. Mortgage lenders use the “middle” score when determining your eligibility for the best refinance rates. If your credit scores are 640, 700 and 720 your “middle score” is 700. Mortgage lenders do not round or average credit scores.
How to Boost Your Credit Score
If you want the best refinance rates for your next home loan you need to make sure your credit score is up to snuff. Here are several tips to quickly boost your credit score.
- Always Pay Your Bills on Time
- Pay Down Your Credit Card Blances
- Avoid Department Store Charge Cards
- Avoid Cancelling Credit Cards
- Time Heals Everything
Never, ever miss a payment deadline. Set up auto billing or use your bank’s online bill pay to make sure your bills are paid on time. Nothing sinks your credit score faster than missed or late payments.
The fastest way to boost your credit score is to pay down and maintain the balances on all of your credit cards below 30% of your credit limit. If you don’t have the cash on hand to pay down the balance one strategy is to ask the credit card company to raise your limit.
Store charge cards are the worst kind of debt you can have on your credit report. Avoid opening new store charge cards and if you’ve already got them pay off the balances but do not close the account.
Do you have credit cards that you never use? Make sure that you pay down the balances but do not close the accounts. It helps to use the cards periodically as long as you keep the balance below 30% of the available credit.
If you have negative information in your credit reports the information will drop off eventually. Avoid paying those “Credit Repair” companies as there is little they can do besides take your money.
Shop Smartly for the Best Refinance Rates
Are you happy with your credit score? Many homeowners try and protect their credit score when shopping for the best refinance rates by refusing to give out their social security number.
If you do this you’re relying on the loan officers “best guess” when quoting mortgage rates and probably wasting your time. It’s true that your credit score takes a ding when mortgage lenders run your credit, this is unavoidable. You can however manage the damage by limiting all of your inquiries to a two week period.
If all of your mortgage lender inquires fall within a two week period your credit score will only get “dinged” for one inquiry.
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