The Finance Blogger


Poor Credit Mortgage Refinancing

Poor Credit Mortgage RefinancingThe questions we got from our last reader involved a poor credit mortgage refinancing issue. Basically the writers mortgage was coming due and he was nervous about renewing the mortgage given his poor credit situation.  He has always paid his mortgage on time , never missing a payment nor being late for a payment. The problem comes from his problems with his credit cards. The two negative things you can do with credit cards is first of all only pay the minimum payment and secondly miss a payment. Always pay off the balance in full each month. If you are not going to be able to do this, then do not purchase items and charge it to your credit card!

Late Payments Impact Credit ratings

Apparently there was a time when had to choose between paying his mortgage payments or being late on the credit cards. He chose to he late on paying his credit cards which put him into the poor credit rating category. Had he taken the reverse, i.e. paid his credit cards and not his mortgage there is a chance that he might have lost his home. He did not do that and has a good relationship with his bank today, even though his credit rating is not so great.

We think the chances are pretty good that the bank will just renew the mortgage at the prevailing rate since his record with them is good. They may look at his credit record and they may only look at his record with the bank.  Obviously we think that customers should never get themselves into a situation were they cannot make their payments. But this is water under the bridge and now he has to deal with the situation.

Visit Your Bank and Discuss the Renewal

We think the best course of action here is to schedule an appointment with the mortgage renewal people at the bank or call the 1-800 number they usually provide and discuss your renewal with them. They will tell you pretty quickly if there is going to be a problem or not. The consumer might even ask to be renewed early to take advantage of the low interest rates to see what will happen.

We think that the best action is to have open communication and initiate the action with the bank. At the very least you will know were you stand and will be able to deal with reality and not worry about what might or might not happen. If you can work out a repayment plan as well that shows that you are serious and plan to meet your obligations, you stand a much better chance of success.

We also suggest that the consumer pay close attention to these credit card limits. Avoid getting further into debt and avoid using the credit cards if possible. With credit cards it is so easy to get into debt. Then with the high interest rates almost impossible to get out of debt. Interest rates on credit cards will run at 20% or even higher. With rates as high as these it is almost impossible to repay them.

Comments are welcome, including the thoughts on the suggestions we provided in response to this contributor. For more information about poor credit ratings and more, click here.

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