Refi now or wait to improve my score and do it later...

This is the million dollar question I’m facing now. I’ve had my broker run the numbers with my current score(mid 600’s) and the only thing he can do at the time is to switch my 5year IO arm to 30 year fixed at the same monthly payment. I know with the 30, I’d at least have some equity if the market around my area should ever decrease(highly unlikely). But he can’t do anything about my other loan(20% of a 80/20 loan) which is a HELOC and with the interest rates rising, I was really hoping to find a bank that would consolidate the 80/20 loan into 1 loan.

So my plan is to wait a few months to build up my credit score and hope the rates don’t get really high and try to do a refinance. Also within a few months, I’m hoping I can build a decent amount of equity on my property from the increasing prices around the neighborhood and the bathroom/kitchen updates that I plan on doing. I doubt this would raise my equity above 20% but don’t find it impossible considering there are a few places selling on my block for higher price and in worser condition(For example, $520k, $590k compared to my $480k place)

So basically, I can either refinance the 80% from a 5/1 IO to a 30yr fixed and have the same monthly payments(will pay down some principle but still have the 20% Heloc) OR I can wait and see if I can increase my credit score to get a better package and consolidate the 80/20 loan into 1 loan.

Part 2 question is it possible to raise FICO by 50 points within a few months? I know there are a lot of variables but wondering if anyone has done it before?

Hey REI Wannabe,
I have heard that the following strategy works in getting your credit to jump instantly. I have never done it before. I am simply passing the info on……
Ask a family member or close friend that has a great
credit score, has a credit card with a high limit and
low balance, and a history of on time
payments, if they would be willing to add you
to their card as an additional guarantor on the card
for a period of six months.

What you receive is their good credit history
reported on your credit profile to boost a credit score that is just shy of
obtaining the most favorable financing available.

I have heard this is a trick that some credit repair companies use to build ones credit history. I am not sure if it is illegal or what. So, if you have someone that just did a bankruptcy to wipe out all accounts or someone with no credit history, you add a couple accounts like this and the score will jump instantly. Payment history and the high limit versus balance owed is the key to making your credit score go up. The only way to get a history is to create one from making on time payments. This is a way to do that rather then opening up new accounts and making payments for 12 to 24 months. .

I am thinking I will get reprimanded for this post, as it is not an honest way to build your credit, but I had to pass it on….

Thanks for the tip but does anyone know if this really works or is legal?

What I “heard” and plan on doing for sure within a few months is to:

  1. Since I just got this mortgage, I heard that the first few payments you make on it will increase your score.
  2. My credit report says there were too many inquires. I just bought car, bike, new place within a few months so I’m hoping it will go up assuming no more credit inquiries.
  3. Besides the mortgage, I only have 2 accounts with balances. Student Loan and 1 credit card. I plan to see if I can borrow money from relative to bring down my credit card debt below 50%.
  4. There were 2 dings on my credit report which I plan to dispute that I never knew about.

But back on topic- Refi the 80% now or wait and try to refi 80/20 into 1 fixed loan later?

That sucks…and here’s why:

If you had a score in the low 600’s or 500’s I would say yeah…wait until your credit is a little better and then refi, but your credit is in the mid 600’s, so any improvement in score is only going to give you a marginal benefit as far as rate and terms available go and guess what’s happing to interest rates while you are fixing your credit?..That’s right! They are headed up.

You my friend are stuck on the horns of a delima. :-\

yeah, I didn’t want to hear it but I knew about that already. I’ll have to play the waiting game and see what Greenspan’s replacement will do. Either that or hope the economy will stay really low due to all these natural disasters.

What I hear is that the FED is going to keep up the .25 bumps until 4.5…pause…continue again mid 2006 until 5.25 - 5.50.

I concur with what you said. Hopefully, it pauses for awhile at 4.5 long enough for me to get my refinancing. That is my only hope.