The standard measure of bad credit is different among lenders. Currently the credit scores ranges between 300-800.Most private lenders will however consider anything below 580 as a bad rating. The ratings are issued by the three major credit bureaus: Transunion, Equifax and Experian. Your lender will scrutinize your ratings before they offer any kind of refinancing. A low rating will definitely give you a hard time in accessing refinance.
A poor or bad rating will make refinancing more costly for a customer. This is because interest charged if financing is approved will be at least 2 points than normal charge. A customer can bargain for a lower charge if the mortgage interest is on the higher side. However worth noting is that this attempt will be compromised by the bad rating.
More often than not homeowners with a bad rating end up taking subprime mortgage loans. Current subprime loans have a lower interest and therefore come as the best alternative for those lucky enough to secure refinancing. The good thing is that you can get prime loan if you improve your credit score. The best place to start would be in timely payments of your bills. It would also be beneficial if you maintain an income that corresponds to your debt obligations.
Genesis of refinancing
For a long time the lending standards were fairly loose. Many people bought homes even without an income. All they provided was documentation and with a score of below 600 one could without a hassle get a house. Well this was until mid 2000 when the housing bubble burst. Today most of these people are stuck with houses they can barely afford. This makes them opt for refinancing. Private lenders have made things worse by requiring a score above 750 for financing.
There are other options in case financing becomes more difficult. The Federal Government has programs that assist stranded homeowners. An example is Home Affordable Refinance Program (HARP).They do not need a credit score but other qualifications have to be met. One is that you should not have been a month late on a mortgage takes within the previous 12 months.
Federal programs also have standards and caveats. Approval could take several months. During this time make sure all your credit payments are made in time. This presents a perfect opportunity to improve your ratings .You should also obtain your credit report through Annual Credit Report website from the major credit bureaus. The reports will help you spot any irregularities therefore enabling you to fix these problems.