Should I refiance?

[3MV]

I am working diligently to rebuild ny credit. I bought a new car last year and financed through Chase with a 21% interest rate. My score was 539, and I was desperate to have ANY kind of credit so I took it. I have been working very hard to rebuild and my EQ is 606, TU 618. I am wanting to buy a house by May 1st through a program for Native Americans. My scores right now would likely get me apporved for this program.  I would like to refinance before applying though so I can lower my car payment and qualify for a larger mortgage.  I have 2 paid judgments that are over 4 years old, my car loan, one CC with no balance, one charge off for $400 from 4 years ago that I am working on paying. Would a refinance drastically hurt my scores right now? 

[cdtotten]

The harm would be from:

1. The inquiry for the new account (<5 points realistically), no big deal.

2. The new account, which you would get dinged for, along with lowering your AAoA, which could have a minor affect as well.

Net effect I wouldn't think would be over 10-15 points, but it could hurt if you are borderline. Thats a lot of negatives in your past; I wouldn't want to lower my score any further if not absolutely necessary.

[Anonymous]

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@cdtotten wrote:

The harm would be from:

1. The inquiry for the new account (<5 points realistically), no big deal.

2. The new account, which you would get dinged for, along with lowering your AAoA, which could have a minor affect as well.

Net effect I wouldn't think would be over 10-15 points, but it could hurt if you are borderline. Thats a lot of negatives in your past; I wouldn't want to lower my score any further if not absolutely necessary.

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+1.

If possible pay off the auto loan

[HoldingOntoHope]

If you are looking to purchase a home within the next 2 1/2 months I would get in contact with someone from the home loan program before you make any financial moves at the moment. They should be able to explain to you what scores you will need and what debt to income ratios will be allowed. If you are dealing with a special financing program, most of us in this forum are not going to be able to offer you qualified advice as to how your refinance may affect the program chances.

I know that when I financed through VA I had to write Letters of Explanation for all negative items and any other financial transactions within the prior six months, including inquiries and new accounts. Good luck in whatever choices you make.

[Hammer23]

If you have those scores, with a good recent auto history, I would guess you could get a much lower interest rate. I would try Wells Fargo Dealer Services, or your local credit union. Capital One is an option as well, but they will HP all 3 CBRS.

Here are a few links:

Wells Fargo Dealer Services - http://www.wellsfargodealerservices.com/Consumers/Loans/ApplyOnline/default.asp

Capital One Auto Finance - http://www.capitalone.com/auto-financing/auto-refinancing/before-applying/?Log=1&EventType=Link&Comp...

[pizzadude]

I second the advice to hold off on your auto refi until you know exactly where you stand with qualifying for a home loan through this special program. If you are borderline with your scores then you shouldn't be adding new inquiries or accounts, it might drop your score below the cutoff.

I understand that you want to lower your monthly payments to qualify for a larger mortgage, just talk with your loan officer and see where you stand first.

[guydiver]

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@pizzadude wrote:
I second the advice to hold off on your auto refi until you know exactly where you stand with qualifying for a home loan through this special program. If you are borderline with your scores then you shouldn't be adding new inquiries or accounts, it might drop your score below the cutoff.

I understand that you want to lower your monthly payments to qualify for a larger mortgage, just talk with your loan officer and see where you stand first.

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I agree with pizza.  Ordinarily it would  be a no-brainer to refinance, but you don't have any wiggle room here. Any new loan will most likely be detrimental to your Fico in the short term.....which is a potential problem for you.  If you can wait a little while to recover, refinancing would be the best option as the potential to lower your fixed auto payment and improve your DTI would help you with your goals here.  Only your loan officer can tell you what your best options are.  Good luck.