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Bad Credit? Best Bad Credit Mortgage Refinance Companies • Benzinga

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Nobody’s perfect. Your credit reports reflect your payment history and can hamper refinancing. If you’re looking to refinance your mortgage, credit dings can cause some gray hairs. Benzinga’s pulled together a guide to help you find the best mortgage refinance companies — no matter your credit.

Best Mortgage Lenders to Refinance with Bad Credit

Here are Benzinga’s top picks for mortgage lenders to refinance with bad credit.

1. PacShores Mortgage: Best for Working with Bad Credit  

PacShores Mortgage offers experience working with bad credit. It provides lending at up to 70% of your home value or purchase price, and nearly all applicants are accepted. And prior bankruptcies, short sales, foreclosures and low FICO scores are all considered.

Alternate documentation is accepted in lieu of financial statements, pay stubs and tax returns.  Available loan programs include refinance and purchase of single-family, multi-units and condos, apartments, and commercial and buildable lots. PacShores does not publish rates. Again, apply for your individualized quote.

2. Network Capital: Best for Variety

Whatever your situation, it’s likely that Network Capital can help you get the home loan refinance you need. Its programs include VA IRRRL (a no-appraisal, no-income verification, limited documentation required loan), FHA Streamline (a no-appraisal, no employment or income verification, reduced FICO score loan) and HARP 2.0 (a no-appraisal, lowered loan-to-value, income, asset and FICO credit score loan). 

Current refinancing rates are:

  • 30-year fixed 3.375%
  • 30-year fixed FHA 2.75% 
  • 5-year fixed 3%
  • 5-year ARM is 3.375%

3. Citibank: Best of the Big Boys

Citibank is your best bet among larger banks. In addition to 30-year and 15-year fixed, Citi offers FHA loans, VA home loans and jumbo loans. You’ll enjoy the clout of a big bank with the personalized attention of a smaller organization. The rate on a 30-year fixed mortgage is 3.375%, while the rate on a 15-year fixed mortgage is 3.125%. 

Credit Scores and Refinance Rates

It’s normal to worry your damaged credit may affect your ability to refinance. To ease your mind, take a look at the minimum credit score requirements and current refinance rates from companies ready to work with bad credit.  

Can You Refinance with Bad Credit?

Yes, you can refinance with bad credit. However, there are things you should know and steps you must take in order to make it happen. 

First, know that refinancing your mortgage can play an important role in your financial life. In a nutshell, a refinance simply replaces your current home loan with a new second loan. After this takes place, your mortgage will be held with the new lender. You will have a new, lower interest rate and a different amount of time to repay the loan.

If your credit history is less than perfect, there are a few reasons you might want to refinance. 

  • Take cash out of your home. A cash-out refinance may be a good option to help you manage debt, make a large purchase or repair your property. This involves a higher balance than your original, and the remainder may be withdrawn in cash. You must have equity in your home to take out this type of loan.
  • Adjust loan terms. You can pay off your loan more quickly, switch to a longer loan term or choose a lower interest rate with a refinance loan. 
  • Get rid of Private Mortgage Insurance. If you have an FHA loan and you put less than 10% as a down payment, you’re carrying PMI insurance on that mortgage. By refinancing to a conventional loan, you can eliminate PMI and save cash. 

If you have bad credit, however, be aware that some of the above options may not be available to you. Even with past credit issues, though, you still have other options for a mortgage refinance. These include:

  • Taking out an FHA Streamline Refi: Here you can refinance your original FHA loan, minus the typical income verification and credit check. However, keep in mind that your premium cannot increase by more than $50 per month, you can’t have missed a payment in the last year, and there must be a tangible benefit such as a lower interest rate after the refinance.
  • Opting for a VA Interest Rate Reduction Refinance Loan: Also known as a VA IRRRL, these loans let you refinance with no appraisal, credit check, or income verification and can be an easy way to refinance your original VA loan. You must be 270 or more days out from closing on your original VA loan and have made at least a half-year’s worth of consecutive timely payments.

If you’re ready to apply, here’s an outline of the refinance application process:

  • Choose a lender when you’re sure you fit the company’s application criteria.
  • Apply with required documentation and arrange for an appraisal.
  • Read your closing disclosure carefully and understand the terms, conditions and costs associated with your new loan.
  • Finally, meet your lender at closing to sign documents and make it official. 

Keep in mind — work to improve your credit score before you refinance to help you get better terms and lower costs. There are actions you can take each day to improve your credit. Here is the breakdown of the factors that make up your credit score:

  • Payment history is the single most important factor and accounts for 35% of your score. Do you pay your bills on time? If the answer is no, now’s the time to change that habit.
  • Credit utilization creates 30% of your score. This factor indicates how much you rely on credit rather than cash. To calculate, divide your current revolving credit by the total of all your revolving credit limits. 
  • Credit history length is 15%. Typically, the longer the better.
  • Credit mix accounts for 10%. How well you manage products like car and student loans come into play here, and the more diverse your credit, the better. 
  • New credit — recently opened accounts and lender inquiries — comes in at 10%. Less is better here. 

How Can I Get the Best Refinance Loan Possible?

You don’t have to be perfect, and your financial past doesn’t need to define your future. Do your homework and determine your needs — for the present and beyond. With this clear understanding, you’ll be able to find a lender to help you secure a mortgage refinance loan.

Read all documentation before you sign it. While this may seem obvious, many people neglect the fine print — and live to regret it. Finally, work to improve your credit so that you can obtain loans more easily and with lower rates.

Frequently Asked Questions

Q: How do I get pre-approved?

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Q: How do I get pre-approved?

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Allison Landa

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First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!

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Q: How much interest will I pay?

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Q: How much interest will I pay?

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Allison Landa

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Interest that you’ll pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.

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Q: How much should I save for a down payment?

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Q: How much should I save for a down payment?

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Allison Landa

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Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first-time buyers. Check out the lenders that specialize in making the home buying experience a breeze.

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Bad Credit

What is a subprime credit score?

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A subprime credit score can affect your ability to obtain financing for student loans, personal loans, or a new credit card. (iStock)

If your goal is to get approved for a new loan or life of credit, your credit score is one of the most powerful tools that you have at your disposal. After all, the score you’re given can determine the types of loans you’ll be deemed eligible for and the corresponding interest rates you’ll be given if you’re ultimately approved. 

Most people are aware their score rated on a scale from poor to excellent by the credit bureaus. However, they may not be aware that another designation also exists: prime credit score and subprime credit score.

Below is a closer look at subprime credit scores. It will cover what this designation means, how having a subprime credit score will impact you, and how to improve your credit score to be given better rates. Keep reading to learn more.

What is a subprime and prime credit score?

In truth, every lender uses a slightly different scoring model, so it can be hard to give specifics on exactly what will count as a subprime score. However, as a rule of thumb, any FICO score that falls below the “Good,” “Very Good” or “Excellent” score range is likely to be considered a subprime score.

As a refresher, here is how FICO, defines their scoring model: 

800 – 850: Excellent

740 – 799: Very Good

670 -739:  Good

580 – 699: Fair

Below 580: Poor (bad credit)

Separately, those in the market for a home loan can get personalized rates using a mortgage broker like Credible without affecting their credit score.

FICO SCORE VS. CREDIT SCORE: WHAT’S THE DIFFERENCE?

How does a subprime credit score impact me?

Put simply, having a subprime credit score can affect your ability to obtain financing for student loans, personal loans or a new credit card. Since lenders view your credit score as an assessment of the level of risk associated with lending to you, they may want extra reassurance that they’ll receive payment. 

If you have a subprime score, you may have to take certain extra steps to be approved for a loan, such as applying with a co-signer. It’s also unlikely that you’ll have access to the same rewards and benefit options as someone with a prime credit score. Subprime borrowers are rarely deemed eligible for 0% APR credit cards, for example.

If you’re in the market for a new card, you can use Credible to see what loan amounts are available to borrowers with your score.

HOW TO FIND THE BEST REWARDS CREDIT CARDS

That said, even if you do get approved for the new loan or credit card, a subprime score will almost guarantee that you’ll end up paying higher interest rates than someone who has a better score. In addition, some financing products aimed at subprime borrowers also come with additional fees like monthly service fees or a higher annual fee. 

How do I improve my subprime credit score?

If you are finding that you’re having a hard time being approved for financing or that you’re being charged high-interest rates, the best thing you can do is to take steps to boost your credit score. Below are a few tips that you can use to launch your credit score into the prime range.

Make your payments on time

Remembering to make your credit card or loan payment on time is one of the best things that you can do to improve your credit history. In total, loan payment history accounts for 30% of your overall score — so, it’s important to avoid late payment of any kind. If you have trouble remembering to make your payments each month, you can set up automatic payments with your lenders. Alternatively, most credit card issuers offer the option to be sent loan payment reminders over email. 

SECURED CREDIT CARDS CAN HELP BUILD YOUR CREDIT — HERE’S HOW

Keep your credit utilization rate low 

Your credit utilization rate is another important factor in determining your credit score. This ratio accounts for an additional 30% of your score and it measures your current balances against your total amount of available credit. Generally, you should strive to keep this ratio as low as possible by paying down any existing debts and being careful about any new charges. Ideally, this ratio should be below 30%.

Refrain from filling out too many applications at once 

Finally, 10% of your credit score is determined by the number of recent inquiries you have on your credit reports. Every time, you apply for a new type of financing, the lender will generally do what’s known as a “hard pull” on your credit, which will mark a hard inquiry on your credit reports. If you have too many inquiries at once, it can hurt your score, which is why it’s important to avoid filling out too many applications at the same time.

HOW TO INCREASE YOUR CREDIT LIMIT WITHOUT HURTING YOUR SCORE

The bottom line 

If you have a subprime credit score and you need financing, your best bet is to shop around for a loan. Since every lender uses a slightly different scoring model, you may find that you’re offered a better rate with one lender as opposed to another.

Those shopping around for rates may benefit from visiting an online marketplace like Credible where they can explore personal loan rates and lenders from the comfort of home. 

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What Is Considered an Excellent Credit Score?

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some of the offers mentioned may have expired.

Do you have an excellent credit score? A lot of people can achieve good credit scores by practicing responsible financial habits, such as making on-time payments, but it takes a little extra knowledge — and some credit card savvy — to take your credit score from good to excellent.

Is having excellent credit worth it? Absolutely. Credit scores make up a huge part of our financial lives, so it’s to your advantage to learn how to get your credit score as high as possible—and getting an excellent credit score is just about as high as you can go.

How do you know if you have excellent credit? What is an excellent credit score and is there an easy way to get it? Let’s take a closer look at what is considered an excellent credit score, as well as what you can do to boost your credit score into the excellent range.

What is an excellent credit score?

According to the FICO credit scoring model, an excellent credit score falls between 800 and 850 points. FICO, or the Fair Isaac Corporation, operates one of the most popular credit scoring systems in the industry, and myFICO.com reports that over 90 percent of top lenders use FICO credit scores to help them make lending decisions.

If your credit score falls within the excellent credit score range, your credit is as good as it gets. Yes, you could try to achieve a perfect credit score, but you don’t need to actively work on building your credit the way you might if you had fair credit or bad credit. Instead, you can focus on maintaining your excellent credit score by practicing the responsible credit habits that helped you earn your score in the first place, like paying your bills on time and keeping your balances low.

What are the credit score ranges?

What is an excellent credit score range? How does it compare to the other credit score ranges? Here’s a breakdown of the five FICO credit score ranges, including the points that fall within each range:

FICO Credit Score Ranges

Excellent/Exceptional 800-850
Very Good 740-799
Good 670-739
Fair 580-669
Poor 350-579

The FICO scoring system occasionally refers to the top credit score range as “Exceptional” — but don’t worry, that means the same thing as “Excellent.” If you have excellent credit, you don’t need to do anything else to get exceptional credit. You’re already there!

What are the factors that impact your credit score?

The FICO credit scoring model uses five factors to determine your credit score: payment history, credit utilization, credit history, credit mix and recent credit applications. Let’s take a closer look at how each of those factors impacts your credit score:

Payment history (35 percent)

This is your history of on-time payments. If you have excellent credit, you’re probably very good at making on-time payments — but if you ever accidentally miss a credit card payment, act quickly to keep it from affecting your credit score. Making on-time payments consistently is one of the best ways to maintain a stellar credit.

Credit utilization (30 percent)

Your credit utilization ratio is the amount of credit you’re currently using compared to the amount of credit available to you. If you have excellent credit, you probably have a lot of available credit because you keep your balances low or pay them off in full every month. That’s great for your credit score. Keeping a low credit utilization — below 30 percent at least, but ideally within single digits — is another surefire way to keep a strong credit standing.

Credit history (15 percent)

This is the age of your open credit accounts. If you’ve been successfully maintaining credit accounts for a long time, your credit score is likely to get a boost. This is one of the reasons why it’s a good idea to keep old credit cards open even when you are no longer using them regularly.

Credit mix (10 percent)

Your credit mix is based on the different types of credit accounts under your name. If you have both revolving credit (like credit cards) and installment loans (like a car loan), your credit score could go up.

Credit applications (10 percent)

Your credit score is also impacted by your recent credit applications. If you apply for a lot of credit all at once, lenders might wonder if you are planning on going into a lot of debt — and whether you’ll be able to pay off that debt in the future. This is why hard credit inquiries, which occur every time you apply for a new credit card or loan, can prompt a temporary drop in your credit score.

Steps to improve your credit score

If you want to learn how to get an excellent credit score — or if you already have excellent credit and want to work toward that perfect 850 — here are some steps you can take to improve your credit score.

Start by making on-time payments every month, if you aren’t doing so already. Since 35 percent of your credit score is based on your payment history, making on-time payments is one of the best things you can do to boost your credit score.

Next, start paying down your balances. The lower you can get those balances, the more available credit you’ll have — which is good for your credit utilization ratio and even better for your credit score. As the Washington Post reports, people with perfect credit scores have an average credit utilization rate of 4.1 percent. That doesn’t mean they never use more than that much of their available credit; it just means that they pay those balances off every month, and keep any revolving balances very low.

You can also increase your available credit by requesting a credit limit increase or applying for a new credit card. If your credit already falls in the Very Good range (740-799), going online and requesting a credit limit increase on one of your existing credit cards might give you the point boost you need to take you over 800.

Lastly, you’ll want to track your credit score on a regular basis — here is our advice on how to get a free credit score — and review your credit reports to ensure that all of the information is accurate and up-to-date. Understanding how your credit score fluctuates based on your outstanding balances, new credit applications and overall credit history can help you make adjustments that will benefit your credit score both now and in the long run.

Benefits of having excellent credit

There are numerous financial benefits of having excellent credit. When you have excellent credit, you can access the best credit cards on the market — including the top travel credit cards, the best cash-back credit cards, the best credit cards for dining out and more. Your excellent credit score will make you an ideal candidate for luxury credit cards like the Chase Sapphire Reserve® card or The Platinum Card® from American Express.

Excellent credit score credit cards generally offer lower interest rates, thanks to your strong credit history. When lenders trust you to pay back your debt promptly and responsibly, they have less of an incentive to charge high interest rates — which means you can expect to receive lower interest rates not only on your credit cards, but also on auto loans, personal loans and mortgages.

Plus, your excellent credit will never stand in the way of your ability to rent an apartment, open utility accounts or — if your employer checks credit before hiring — get a job.

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Used Vehicles and Bad Credit Borrowers: Smart Car Shopping

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When you’ve got less than perfect credit, going for a used car is a smarter decision than seeking that brand-new vehicle. Not to mention, used cars are becoming the preferred choice for borrowers across the credit score spectrum.

Used Cars Becoming More Popular

Used Cars and Bad Credit Borrowers: Smart ShoppingYou don’t have to settle for the clunker in the back of a used vehicle lot – but now may not be the time to finance the most expensive car, either. When you’re struggling with poor credit, reliability and good loan terms should be at the front of your mind.

More specifically, you should choose a reliable vehicle that’s going to last, and one that you can comfortably afford each month without breaking the bank. It seems obvious, everyone wants a reliable car! But one of the main goals you should focus on with your bad credit auto loan is repairing your credit for future purchases.

Not only does having a high credit score improve your chances of getting approved for new credit later, it can also save you money. Having a good credit score means a higher chance of qualifying for the lowest interest rates and the best car loan deals offered.

However, you have to start somewhere. And a reliable used vehicle with a bad credit auto loan could be the ticket.

Recently, even good credit borrowers are increasingly going for used cars. The data shows used vehicle purchases are on the rise across all credit scores. While everyone was locked indoors during statewide shutdowns due to COVID-19, dealers began shifting their focus from new cars to used ones, and they’ve started showcasing their certified pre-owned vehicles.

Worried About Getting a Used Vehicle? Try a CPO Car

If a used car seems risky to you, check out a certified pre-owned (CPO) vehicle. A CPO auto loan can be seen as the middle ground between new and used, and it can be a good option for borrowers who want a newer car without the hefty price tag.

CPO vehicles are inspected by a manufacturer-certified mechanic, cleaned, and come with some type of warranty. Many CPO cars are also just coming off-lease, and usually have lower mileage. Since a CPO’s selling price is generally cheaper than financing a brand-new one, borrowers who are looking for reliability are starting to turn toward the certified option for the most bang for their buck.

If you work with a bad credit auto lender (or subprime lender) and you qualify for financing, you may be able to get into a CPO vehicle. Subprime lenders operate through a dealership’s special finance department, so bad credit borrowers who meet the requirements could qualify.

In general, CPOs tend to be more expensive than regular used cars, since they come with more perks. If you don’t quite meet the requirements of a CPO vehicle, opting for a used car is still a smarter financial choice for borrowers with questionable credit scores.

Subprime Lenders and Improved Approval Chances

When you apply with a bad credit auto lender, they determine what monthly payment you qualify for based on your individual information. This is done by looking at many aspects of your credit and financial life: credit history, income, living situation, expenses, overall stability as a borrower, and more.

Once the subprime lenders determine how much vehicle you can afford, they tell the dealer. You then work together to find a car that fits the monthly payment you qualify for. Getting your monthly payment to a lower amount can be easy if you simply extend the loan term, but you should choose a used vehicle that’s reliable, while keeping your loan term as short as you can.

After you narrow down some car choices, you’re going to need a down payment. This can vary, but subprime lenders typically require borrowers to have at least $1,000 or 10% of the vehicle’s selling price. The more expensive the car, chances are, the more you’re going to have to put down to get into that vehicle. Poor credit borrowers are usually required to put money down to prove to the lender that they’ve got skin in the game, and down payments improve your chances of getting approved.

Meeting the down payment requirement gets easier when you go for a cheaper car – another reason why many bad credit borrowers opt for used vehicles. On top of all this, bad credit borrowers are more likely to get approved for used cars anyway, due to the lower sticker price.

Repairing Your Credit With an Auto Loan

If you work with a subprime lender, the auto loan itself could give you the chance to repair your credit. Subprime car loans are reported to the credit agencies, and with on-time payments, you can rebuild your credit. However, if you go for a long auto loan or one with high payments, you could be putting yourself in the hot seat, and risk damaging your credit.

Since borrowers with lower credit scores don’t normally qualify for the lowest interest rates, you could also end up paying more for that expensive new vehicle than what it’s actually worth.

Car loans almost always use simple interest, which means the charges stack up daily. The more you owe and the longer you owe, the more you pay in interest charges. Some bad credit borrowers find themselves with double-digit interest rates, which can end up being very expensive on a loan for a new vehicle.

Additionally, due to the higher selling price of new cars, many borrowers find themselves stretching their auto loan terms to the max, taking out 84-month loans, or sometimes higher, just to afford the monthly payment. Again, long loan terms can spell disaster for a bad credit borrower who’s more likely to only qualify for a high interest rate.

Not to mention, who wants to be stuck with a monthly payment for eight or more years for the same vehicle? Shorter loan terms save you more in interest charges, and a cheaper car means a lower monthly payment, too.

Ready to Find Your Next Used Vehicle?

Overall, a bad credit borrower needs to choose a sensible vehicle that’s reasonably priced, and go for auto loan terms that they can afford long term. Car loans are big commitments, often between five to sometimes eight years long. If you go for a new vehicle with a high monthly payment that rides the edge of your budget, you could end up damaging your credit if something happens. Focus on repairing your credit now, so you can save more cash and qualify for better deals later. Credit repair is a long-term game – play wisely!

If you’re ready to get into your next auto loan, start your car shopping journey right now with Auto Credit Express. We’ve got a nationwide network of dealerships with special finance departments that are equipped to work with bad credit borrowers. To get matched to a dealer in your local area at no cost, complete our auto loan request form.



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