It's a fact of life … credit, bad or good, often controls one’s financial destiny.  So successfully mortgaging or refinancing with bad credit can be a tall order to fill.

When it comes to risk tolerance, mortgage lenders have strict guidelines.  Consequently, they’ll review your credit, your home equity and your debt-to-income ratio when assessing your ability to finance or refinance. While some lenders may extend more lenient funding, generally there are few options for borrowers with questionable credit.

A good first step to improve your potential for loan approval might include a credit review to address adverse or inaccurate entries – not the most novel idea, but a basic good practice.

If your credit shows late payments, the easy and obvious fix is to religiously pay bills on time.  Late bills or collections are devastating to your credit score.  So strive to amass some excess money each month that allows consistent on-time payments and faster reduction of principal on higher-interest rate loans.  This will reduce your debt-to-income ratio more quickly, keep credit cards controlled, potentially lower your mortgage balance while increasing home equity, and simultaneously improve your credit score which makes you more appealing to a lender.

Lastly, for those with credit scores between 620 and 640, consider discussing FHA financing with your lender. These government-insured loans are designed to help borrowers with lower income or credit scores.

While there’s no magic overnight fix to get your credit right, making a few small changes and sticking to a plan, increases the likelihood you’ll get the financing or refinancing you need. Feel free to contact me today for a consultation. I’ll be happy to discuss any questions you may have, and/or help you determine the value of your home.

Allyson Hoffman, ABR, ACRE, CDPE, CRS, e-PRO, GRI, SFR, SRES
RE/MAX Villager
Serving Chicago's North Shore, North and Northwest Suburbs
[email protected]

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Allyson Hoffman is your ultimate real estate resource for Chicago's North Shore, North and Northwest Suburbs and surrounding areas. Visit my website for detailed information regarding today’s real estate markets.

Photo courtesy of Simon Cunningham/