When you’re thinking about refinancing your home here in Michigan, you’re probably focused on getting a better interest rate. And guess what? One of the biggest things that affects the interest rate you’ll be offered is your credit score.

Think of your credit score like a financial report card. It’s a number that lenders use to see how good you’ve been at paying back money you’ve borrowed in the past. A higher score means you’ve been responsible, and lenders see you as a lower risk. This usually means they’re willing to offer you better deals – like lower interest rates on your new refinance loan!

Why Your Credit Score Matters for Refinancing:

• Lower Interest Rates = More Savings: This is the big one! Even a small difference in your credit score can change your interest rate by a little bit, and that can add up to thousands of dollars saved over the years on your Michigan mortgage. The better your score, the better the rate you can get.
• Easier Approval: With a good credit score, lenders are more likely to approve your refinance application quickly and smoothly.
• More Choices: A strong credit score gives you more options when it comes to lenders and loan programs.

What’s a “Good” Credit Score for Refinancing?

Generally, a credit score of 620 or higher is often the minimum needed for a conventional refinance in Michigan. However, the higher your score, the better. Scores in the upper 700’s and above usually get you the best rates available. Some government-backed loans like FHA or VA loans might have slightly lower minimums, but even with those, a higher score always helps.

Tips to Improve Your Credit Score Before You Refinance:

If you’re planning to refinance your Michigan home soon, here are some important steps you can take to boost your credit score:

1. Pay Your Bills ON TIME, EVERY TIME: This is the most important thing! Your payment history makes up the biggest part of your credit score. Set up reminders or automatic payments so you never miss a due date on your credit cards, car loans, or any other bills.
2. Keep Your Credit Card Balances Low: Try to use less than 30% of your available credit on your credit cards. So, if you have a card with a $1,000 limit, try to keep your balance below $300. The lower, the better! This shows lenders you’re not stretched too thin.
3. Check Your Credit Report for Mistakes: You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at AnnualCreditReport.com. Look for any errors, like accounts that aren’t yours or payments incorrectly marked as late. If you find a mistake, dispute it right away!
4. Avoid Applying for New Credit: When you apply for a new credit card or loan, it causes a “hard inquiry” on your credit report, which can temporarily lower your score. Avoid opening new accounts right before or during your refinance process.
5. Don’t Close Old Accounts: Even if you don’t use an old credit card anymore, keeping it open (with a zero balance) can help your credit score by showing a longer credit history and more available credit.

Improving your credit score takes time and effort, but the savings you could see on your Michigan refinance make it well worth it.

Ready to see how your credit score can impact your refinance? Don’t let uncertainty hold you back. As a local mortgage lender and CDLP (Certified Divorce Lending Professional) serving homeowners across Michigan, I can help you understand your current credit picture and guide you on the best path to get the most favorable refinance rates. Contact me today for a personalized assessment of your credit and refinance options!