Refinance Loans and Credit Checks, What You Should Know

If you are considering certain types of home loan refinancing, the sheer number of choices you face can make deciding what loan to apply for can be daunting. Your financial needs and goals will play a large part in what you decide to do--knowing some of the FHA loan rules ahead of time can be a big help when trying to choose.

Some borrowers want a refinancing loan because they’re trying to get lower payments. Many of these loans require no credit check. But for the borrower who wants cash out on the refinance loan, a credit check is always required.

The credit check will include an examination of your payments in the 12 months leading up to the loan agreement. If you have missed a house payment in the last year, that could count against you when trying to apply for the new loan. Make sure you put 12 months between you and the last late payment of any kind for best results.

Your credit check may uncover things that aren’t related to your specific credit profile. Sometimes mistakes crop up in the credit report that need to be addressed, and sometimes a borrower is a victim if identity theft and didn’t know it. Either way, the borrower who doesn’t look at his or her own credit report when applying for cash out refinance loans won’t know about these issues until it’s too late.

Check your own credit reports before applying for any major line of credit. You need to do this far in advance of the application for one big reason--if you DO find identity theft or errors on the report such as old or disputed collections or judgments, it takes time to correct these on your report. Sometimes it takes many months to address depending on the severity of the problem.

Your credit report data can only come to the lender by way of the approved sources (the three major credit agencies, or directly from creditors and utility companies, etc. in the case of more nontraditional credit). Your lender cannot get your credit report information from you, or from any “third party” not directly associated with credt

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