Understanding average rates on home equity lines of credit
Credit Score Advice - Home Equity Loan Tips for Better RefinancingRefinancing your house can save you money. Even with the interest rates climbing, they are still at the lowest levels in decades and now is a good time to refinance your home before the rates climb higher. Before choosing a lender to refinance your current mortgage, consider a few key factors and analyze your options. Your current interest rate, the length of time you plan to stay in your home, your credit rating, and the value of your home are all important issues to consider when looking at refinancing your house. Lets concentrate on your credit score and how it effects refinancing. A credit score or rating is something that every adult with a credit report has. This is commonly known as a FICO score, which is a credit score developed by Fair Isaac & Co. Credit scoring. This is a method of determining the likelihood that credit users will pay their bills. Lenders analyze your credit scores to determine whether or not to approve a home mortgage, a car purchase and nearly all other types of loans. Your credit score can have a huge impact upon your future and those with a good credit rating can look forward to a far brighter financial future than those with poor credit scores. So, how exactly is your credit score determined? Before lending you money, creditors want to determine how much of a risk you arein other words, how likely you are to repay the money they loan you. Credit scores help them do that, and the higher your score, the less risk they feel you'll be. The rewards of raising your score speak directly to your wallet: You'll qualify for more loans and be offered better interest rates. Your credit report contains a range of information relating to your financial situation, including the money you owe or have borrowed, your repayment habits, any missed or late payments, court judgments and bankruptcies, any loan applications you have made, and any loan refusals. Your credit rating can be affected adversely in many ways, and this can include missing or late payments, as well as being turned down for credit by lenders and merchants. Credit Scoring Analyzes Five Areas of Your Credit Report 1- Your Payment History 2- Amounts You Owe 3- Length of Your Credit History 4- Types of Credit Used 5- Your New Credit- Types of Credit in Use Currently You can improve your credit scores by taking a close look at your credit reports and charting a plan of action to improve them. As follows are a few tips to increase your credit score Correct blatant mistakes. Your credit score is only as good as what shows up in your credit report. Review your reports from all three credit bureaus for accuracy once a year as well as several months before applying for a loan. Pay your bills on time. This is always a good practice, and it's especially critical that you make prompt payments close to the time you need a loan. That's because a late or missed payment in the last few months is likely to lower your score much more than an isolated late payment five years ago. Reduce your credit card balances. A heavily weighted factor in your FICO score is how much money you owe on your credit cards relative to your total credit limit. Generally, it's good to keep your balances at or below 25 percent of your credit card limit, said Jeanne Kelly, founder of The Kelly Group in Brookfield, Conn., which helps clients improve their credit scores. Pay off debt rather than moving it around. Since the ratio of your credit card balance to your credit limit is key, closing out an account and transferring the balance simply means you increase that ratio, which is likely to lower your score. Don't close unused credit card accounts near loan time. If you have several credit card accounts but are only using a few of them, you'll only raise your balance-to-limit ratio if you close the unused ones. You also shouldn't open new accounts when applying for a loan if possible. So where do you fit in? It all depends on the loan program. Conventional loans offer the lowest rates for residential properties, but you will pay almost 1% more for mortgage insurance if you borrow more than 80% of the property value. This is to protect the lender from the risk of a low down payment. Sub-prime loans are available for people whose credit profile won't qualify for conventional loans, or who have special needs with regard to income qualifying, or debt ratio, or similar issues. Sub-prime loans typically run about 2% higher to 8% higher than conventional loans, depending on the credit issues in your file, and the amount you are looking to borrow. They typically run about 2 to 6 points higher in loan origination fees as well. Hard money loans are typically available for severely impaired credit situations, or homes where the property needs rehabbing. This is the one area in real estate lending where lenders don't care too much if they get the property back. They usually charge a stiff fee to grant the loan (10 to 15 points), the rates typically run 16% to 18% interest only for 2 to 5 years, so these lenders make sure they have a lot of protection from a default situation. When it comes to credit score the one thing to remember is the better your score the brighter your financial future is likely to be, so it is important to keep your credit score up as high as possible. Laura is an experienced copywriter who produces great articles about mortgage related topics for homeowners. You can read more mortgage related loan articles online at Smart Mortgage Refinancing. If you want more information about home equity or debt consolidation loans, please check out Home Equity Loans Direct. If you want to learn more about your credit report, please visit http://www.experian.com/ More Useful Resource and Updates on average rates on home equity lines of credit
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