Bad Credit Refinance Loan

If you've been chronically late paying your bills, you've had a judgment filed against you or you've defaulted on a loan, chances are you have bad credit. 

The problem with statements and assumptions about "bad credit" is that there is no cut-and-dried definition for bad credit. Whether or not you have what would be considered bad credit typically is determined by looking at your FICO score, which is a score tabulated by taking into account your credit history, which encompasses everything from your mortgage to your credit card payment history to that old department store account that went to collections.

A FICO score can range from about 350 to about 800, but it's most common to have a score between 500 and 800. A score of about 720 or higher is generally considered an excellent credit score, and people with that type of score usually will get the best interest rates available on loans.

When you get below a score of 700, that's where things get murky. Generally a score between 600 and 700 would be considered fair credit, and a score below 600 would be getting into the territory that might be referred to as "bad credit." If you just have a few late payments in your recent credit history, you might still have "bad credit," but you'll probably be able to get a better interest rate than someone whose credit is littered with late payments, collections and charge-offs (where a company basically gives up on collecting the money from you and writes off your debt.)

If you have bad credit, you still might be able to refinance your home or car loan through a bad credit lender. Maybe you had horrible credit when you first got your loan for your home or car, and now your credit has improved a bit and you want to refinance.

If that's the case, you might be able to get a slightly better interest rate if you refinance. Depending on how bad your credit is, and especially if your credit score is below 600, you might want to take some small steps to improve your credit score before you try to refinance. Even small improvements can make a fair difference in the interest rate you end up with.

If you can wait a few months before applying to refinance, here are some fairly quick and easy things you can do that could have a big impact on your credit score:

1. First, look at your credit reports from the three major reporting agencies. You can get these reports for free once a year at www.annualcreditreport.com. However, these reports do not contain your credit score. If you want to see your score, and you should, you'll have to pay about $15. A good place to get your score is at www.myfico.com. 
2. If you see anything incorrect, follow the dispute process outlined when you got your credit reports. This is very important. I recently ordered my reports and noticed that a phone company had reported a charge-off of $100 (meaning that they had given up on collecting the money from me and had written it off) after I had switched to a new phone company a few years ago. A charge-off is not a good thing, and I specifically remembered paying that final bill. It took me about two seconds to click on "dispute this item" and two days later I had a notice in my email in-box that the incorrect item had been deleted. Chances are, you probably have an erroneous item somewhere on your report too.
3. Pay your bills on time fanatically for three months or more. If it looks like your problems with paying bills late are in the past, that can improve your credit score.
4. If you have credit cards where your outstanding balance is at or almost at your credit limit, try your best to pay some of them down. If you have very little "available credit," that can have a big impact on your score. Lenders will look on you more favorably if your balances on credit cards stay below 40 percent of your credit limit.
5. You can also ask your credit card company to raise your credit limit. Also, check to make sure your credit limit isn't being reported on your credit report as lower than it actually is. If it is, get it corrected.
6. Don't go around applying for every store credit card you're offered. A slew of inquiries on your report can have a negative impact because it makes it look like you're desperate for credit and no one will grant it to you.

If you take the above steps, you might not see a huge improvement in your credit score, but you probably will at least see a small improvement. 

So, now it is time to find a loan company that will offer you a loan. The first thing you'll want to do is gather up all of your financial records for your current loan, whether it's home, car or something else. Look at the current interest rate you are paying. Then do the math and figure out what kind of rate you'd need to obtain to make refinancing worthwhile.

After that, your next steps depend on what you are refinancing.

If you have bad credit and want to refinance your house -- especially if you are currently in danger of foreclosure -- you should not fall prey to any scams that ask you to pay for help.

Instead, get in touch with the Federal Housing Administration. By calling them at 888-995-HOPE, you can speak with a housing counselor for free, who will help you figure out how to deal with your current lender, how to avoid foreclosure and what refinancing options are available to you.

You might be eligible for refinancing through HARP, the Home Affordable Refinance Program, which is part of the Obama administration's Home Affordable program, an effort to get the housing market back on track and prevent people from either losing their homes or falling prey to scam artists who want to charge hefty fees or steer them toward sky-high interest rates.

So, if you want to get a bad credit mortgage refinance loan, there is hope.

If you want to find a bad credit car refinance option, that's a different story. The government is much more invested in helping people keep their homes and avoid foreclosure, so there are more options for help with homes.

But if you have bad credit and want to refinance your car, there are still options open to you. In fact, because of the high-pressure atmosphere surrounding car buying, and the large number of unscrupulous dealers who prey on people with bad credit, many people with bad credit are paying absolutely outrageous interest rates of 25 percent or more. For most people, there is no need to be paying this much, even if your credit is shaky.

But maybe you made a mistake and were pressured by a dealer. You are not stuck. Just visit CarBuyingTips.com for some excellent advice on refinancing your car. You can refinance your car online and lower your monthly payment and save thousands of dollars over the life of your car loan.

A bad credit refinance loan can help you to turn your financial problems around. But, just make sure you don't do anything hasty and don't ever let anyone pressure you into applying for a loan. Go with your gut and take your time, making sure to only deal with reputable companies.

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