Can I refinance with 645 score, self employed and penalty?

I wanted to refinance so I can pay lower payment but why can't I refinance with lower interest? just need advice. I have a credit score of 645 and my husband 634. Is that the reason, my credit? or that my husband is self-employed and can't show proof of income since he started couple months ago. He makes around $4000-$5500 a month and I make $2950 a month. Is it our debt to ratio? Our mortgage is $5292 at 10% , I just want to refinance so my payment is lower. I have a penalty which is about $25,000 maybe that's the reason too.

Ok here's the question. I decided to wait until my penalty is over next year but money is hard since my husband is self employed, depending on certain month. We are living pay check to pay check.

In order for me to get a great loan with low rate, what does my score have to be?

6 Answers

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  • VT
    Lv 5
    1 decade ago
    Best answer

    Do not refinance until the prepayment penalty expires.

    Definitely, some of your problem is due to your FICO credit scores. Both FICO 634 and FICO 645 are above sub-prime (620 - 625), but they are below average (673 - 723, depending on the survey). So, you two are an above-average risk based on your behavior around credit (income does not figure in your FICO score, see link, below).

    My guess is that you have delinquencies (late payments) or you have credit card accounts that are maxed out.

    Given that you have a year before refinancing, you have a chance to improve your behavior.

    Try to pay off your balances, but do not close the accounts once you pay them off.

    15% of your FICO score is for length of credit history, the longer the better. The average credit user has an oldest open account that has been open for 14 years. Where do you fit on this scale? These are the toughest FICO points to earn. They also score you on the average length of time all your open accounts have been open. So if you close the old account, you'll hurt your score because (1) you lose your oldest account and (2) the average age of your accounts goes down.

    30% of your score is credit utilization: how much of your credit limit is used up by your balance? On each revolving account, you need to keep your balance below 30% of your credit limit, or you will hurt your FICO score. For example, if you have a $200 credit limit, you must not have a balance higher than $60, which is 30% of $200. So a paid off account will have a zero balance on it, and you can't get any better than 0% utilization. They also look at total utilization: they total up all your balances, and all your credit limits. That total percentage utilization must be kept below 30% of total credit limits, or you'll hurt your FICO score. Close the old paid off account, and you'll take away $0 in total balance, but you'll take away all those dollars in credit limit, and up goes your total utilization, and maybe down goes your score. If you have the money to pay down balances, this is the easiest way to raise your score. You'll see big results in about a month or two, as long as it takes your creditors to report your payments to the 3 major Credit Reoprting Agencies (CRAs).

    10% of your score is on credit mix. The good types of credit are mortgage, secured car installment loan, prime (unsecured) major credit card (MC, V, AmEx, Disc) and store cards (Macy's, Home Depot, etc.). The bad types of credit are payday loans, personal-finance loan accounts for purposes of cash advances, still-secured credit cards and overdraft loans. Ideally, you want to have at least one account for each of the good types of credit. Close the last account in one of the good types of credit, and down goes your score.

    As for payment history, you must pay at least the minimum every month without ever being late, or you will hurt your credit score. Payment history is 35% of your FICO score.

    Let's suppose you have paid off all the balances on all your credit cards. Keep your open cc accounts healthy by making one small, NECESSARY purchase (one purchase of groceries, gasoline or a utility bill on autocharge to the cc) each month and using auto-pay to pay it off in full the next month. No finance charges necessary to score max FICO points for the 35% of your score that is for payment history. Just purchase your way, once each billing period, to a small positive balance, and pay if off in full after the bill arrives, before the due date.

    Lastly, get your free annual copies of your credit report at http://www.annualcredit report.com and go over them carefully for mistakes. About 70% of the population has a mistake on at least one of their credit reports. Dispute your mistakes and if your dispute is accepted, you might get a score increase as a result.

    To get a great rate, you must raise your FICO score until it is above average. FICO 760 will get you the best rates on any form of credit.

    Please vote: Did this help?

    Source(s): http://www.myFICO.com especially the articles, "What's In Your Score" and "What's Not In Your Score" and all the articles under the Support tab.
  • Anonymous
    5 years ago

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    RE Can I refinance with 645 score, self employed and penalty?

    I wanted to refinance so I can pay lower payment but why can't I refinance with lower interest? just need advice. I have a credit score of 645 and my husband 634. Is that the reason, my credit? or that my husband is self-employed and can't show proof of income since he started couple months ago. He makes around $4000-$5500 a month and I make $2950 a month. Is it our debt to ratio? Our mortgage is $5292 at 10% , I just want to refinance so my payment is lower. I have a penalty which is about $25,000 maybe that's the reason too.

    Ok here's the question. I decided to wait until my penalty is over next year but money is hard since my husband is self employed, depending on certain month. We are living pay check to pay check.

    In order for me to get a great loan with low rate, what does my score have to be?

  • 1 decade ago

    It sounds like your credit has improved since your last refinance. 10% means either you were super subprime or got taken by your last broker/bank. Anyways wait till the pre-pay is up and in the meantime work on your credit. Keep your credit Card balances around 30% of your maximum. If you have collections or inacurracies, I would look into a credit repair company to go in and fight these items. I know a good company that I refer my clients to.

    To get the best rate for your credit 720 is what I would shoot for.

    Source(s): www.veracitycredit.com
  • Anonymous
    5 years ago

    You need to check out this video on how to increase your credit score by using a 100% legal loophole. Here is the video URL: http://www.creditscoresecret.org

    I was able to get to 595 from 489 in just one day and from 489 to 748 in just a few week; that's pretty fast in my book. Good luck!

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  • Anonymous
    1 decade ago

    Yikes! That's a huge prepayment penalty, you must have an ARM loan. I would wait for your penalty to expire before refinancing because it will save you $25000.

  • ?
    Lv 6
    3 years ago
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