Credit Score in Dallas>Question Details

Jay, Home Buyer in Dallas, TX

if you are current on your payments and have good credit, will a short refinance impact your credit score?

Asked by Jay, Dallas, TX Fri Aug 8, 2008

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T.E. Sumner’s answer
Short in time could mean you're planning to refinance and then sell. New debt to replace old debt does not normally raise or lower your score. However, if you old loan has a long history and you trade it for a brand new loan, the lack of payment history on the new loan will have a small negative impact beginning about 60 days after closing.
Short on paying off the old loan with a refinance will have a severe impact on your credit score. But if you are current, why would you be thinking about shorting the loan?
Credit scores fluctuate over time for a variety of reasons. The best scores are obtained when you pay like clockwork on debts, never late, never missing. On revolving credit lines, try to keep your balances below about 30% for optimum effect. Lines with high balances near the credit limit tend to draw down your rating.
Too many lines will drawn down your rating, too, but never close out lines that have a long history of proper payment. If you have more than a dozen lines, you might consider dropping some of the newer ones. The optimum number of lines seems to be between 4 and 8, 2 minimum.
Mortgage debt, on the other hand, is more strictly about on time payment than current credit versus high credit or maximum credit. Secured debt, similarly, is about paying on time.
When all debt payments are added together, the ratio of payments to income should be comfortable for you to make each month, and a new mortgage lender will check that in addtion to your credit score. The capacity to pay off debts combined with a history of willingness to pay on time will get you the best ratings.
Perhaps you could clarify what you mean by short and what you are considering doing?
Web Reference: http://www.Mortgages-TX.com
1 vote Thank Flag Link Fri Aug 8, 2008
Not significantly at all. Sure your closing one loan and opening a new one basically so your average age of accounts will drop but that accounts for 15% of your score. I wouldn't worry about it
0 votes Thank Flag Link Mon May 6, 2013
It all depends on how the old lender (the one getting paid off) will report the difference of the shortage on your credit report.

Best of Luck;

Christina Solorzano;
CEO & SR Credit Repair Specialist at
Everlasting Credit Repair
Ex-Mortgage Broker of 10+ years
http://www.everlastingcredit.com

We also have DIY Packages available.
0 votes Thank Flag Link Fri May 3, 2013
You can refinance for more than your house is worth if you have a Conventional loan that you got before June 2009, and that way you can lower your rates and possibly even pay the house off a little earlier while making lower payments. Please contact Kelly at kfest@loansimple.com or 972-854-3270
0 votes Thank Flag Link Mon Apr 30, 2012
I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website. http://consumer-action.org/

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm


The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.


Trevor Curran
NMLS #40140
0 votes Thank Flag Link Sun Apr 29, 2012
Yes it would impact your credit score.
0 votes Thank Flag Link Fri Nov 28, 2008
if you are current on your mortgage it is unlikely the bank would even consider doing a short sale with you. And yes if you do a short sale the amount written off does show up on your credit as a write off or a collection account if they think you have the ability to repay or own another property they can attach.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu Nov 27, 2008
If you are not "seasoned" (6 mos.) in your current mortgage, some lenders will not refinance. (You may also have a prepayment penalty if you are refinancing short of the Note Terms depending on the type of loan that you have). But, typically refinancing does not hurt your credit score. You do have to qualify for the refinance and that includes appraisal. So, if your equity has been squashed, as most peoples's has, it may not be worth refinancing. The cost of the loan and the PMI insurance if your equity is less than 20% of the value. The rule of thumb says that you need a 2 percentage point reduction in the interest rate to make the cost worth it.
Are you foreseeing problems with your payment? You may want to look into a mortgage modification to ammend the terms of your note. In this case, you may have to miss a payment and that hurts your credit score.
0 votes Thank Flag Link Thu Nov 27, 2008
A short sale will impact your credit score if that is what you are asking.
0 votes Thank Flag Link Tue Aug 12, 2008
Jay,
I do not understand a short refinance, Bruce says it is refinancing less than you owe. Where in Texas do you do that?
Any thing you do that is not on the up and up will impact your credit and some things that are. Do not try to out think the bankers.
If you are current on your payments and have good credit why would you want to try something funny?
Please explain further.
Margaret
0 votes Thank Flag Link Mon Aug 11, 2008
Jay,

Are you speaking of a "short sale" or a "Pre-foreclosure"? If so the biggest cause of credit issues is the late pays until you short sale. A pre-foreclosure is many times going to be the best method to salvage your credit. The biggest drop in credit we have seen to date is 155 points doing a short sale. If this is not what your discussing. Please forgive.
0 votes Thank Flag Link Sat Aug 9, 2008
Hi Jay,

Experian (one of the three / Experian, Trans-Union, Equifax) has a great deal of information on their web site regarding credit and credit scoring.

http://www.experian.com/consumer/credit_education.html

Here’s another great read:

http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf


I know it's a lot of information but I think it's worth taking the time to read through it. The big issue to remember is that your credit score is a rating of how you manage your credit over time.

Best Regards,

Rich
0 votes Thank Flag Link Sat Aug 9, 2008
Yes it will reflect on your credit report. Reduction in credit scores unknown
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Fri Aug 8, 2008
What is a short refinance? If you are talking about refinancing less than what you currently owe and therefore asking the lender to forgive part of the current loan, then yes, that will likely impact your credit score. How much???? many more factors to consider.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Fri Aug 8, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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