Will refinancing help my credit score? My score is less than 500, we would like to move in the next year?

This is my situation, right now my rate is 7.something% fixed. My credit is horible, under 500. I was wondering if refinancing(we have someone that'll give us 9.99% for 2yrs,then refi or buy) will help out our credit score so that we could by a bigger better home within the next year or so. Please help, thanks

Public Comments

1. Buy what is within your capability. Getting larger loan amount means getting deeper into debts. Getting into deeper debts mean bad credit score.
2. Bottom line is that you need to pay your bills, all of them. And you need to do that without more debt!
3. Absolutely not! Companies want to know that you stick with them, and you are reliable on your payments. Flip-flopping companies is a terrible idea! If you have a loan with 7.5% or whatever, thats not too bad! Stay with it. If you have bad credit, it means that you probably can't afford a newer house anyways, so you should put off that dream for a while, while your credit and income improves. Why on earth would you take a 9.99% loan when you have one now with 7%? Your home might be bigger and better, but your bank account will be tiny and over-drafted!
4. I am going to say NO. Opening new accounts does not improve your credit score. Also based on your score I would stick with your 7% rate. I would be pretty sure your 9.99% deal is not as good as you think.
5. The only way this will help your situation is if there is enough equity in your home. You can only go to 65% to 70% max LTV based on a sub 500 score. The only way this would make sense is if you consolidate all your debt and have one standard payment that you can afford for the next 2 years. Having perfect payments for 2 years, even 6 months, will increase your score significantly. It all depends on if you have a lot of debt, late payments, enought equity, and the cost vs. benifits add up. Make sure you do a lot of research before jumping into this type of loan. If you have further questions, go ahead and email me. I hope this helps. Ngrant@pacifina.com