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Cleaning up Credit Leads to More Refinancing Options
By Karen Lawson
CMR Columnist
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Refinancing is a popular way to pay off high interest credit card debt and consumer loans. If you've had severe credit problems such as missing multiple payments, repossessions, or bankruptcy, you may want to consider rebuilding your credit before refinancing.
Credit Repair: Beware of Scams
The only person who can repair your credit is you, and it takes time. Beware of internet ads offering "overnight" credit repair, or claiming that they can remove derogatory information from your credit report. Raising your credit score and cleaning up your credit report will take time and effort on your part.
Communicating with Your Creditors
If you are past due with any payments, it's essential to contact your creditors and let them know why you're paying late, and when you will be able to pay. If you have put off contacting your creditors, you may wish to engage the assistance of a non-profit credit counseling agency. These agencies can assist with debt consolidation and repayment. They may charge a small monthly fee, and they do not claim to produce miracles, but they will work with you and your creditors to reach a feasible repayment agreement. If your credit is ruined due to identity theft, it's important to advise your creditors immediately. Keep in mind that your home is a significant investment, and your mortgage company expects to be paid first. If you must be late with a mortgage payment, call your lender immediately. They may be able to assist with temporary forbearance or a repayment agreement, but do call them!
Refinancing Can Help
If you've had minor credit problems, and have enough home equity, you may be able to qualify for debt consolidation refinancing. Benefits of this can include paying off multiple accounts, eliminating extra costs such as late fees, and gaining tax advantages, and a little more flexibility in your household budget. Credit card and loan accounts will show up as paid in full once your refinancing is complete, and your creditors are paid.
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.
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