Credit Tip: How to Prepare Your Credit for Refinancing

Refinancing your home loan can be a smart financial move—lower monthly payments, better interest rates, or tapping into your home equity for big goals. But before you dive in, there’s one critical piece to focus on: your credit.

Lenders will take a close look at your credit health to determine your refinancing terms. The stronger your credit profile, the better your chances of scoring a favorable deal. Here's how to get your credit in shape before applying to refinance your mortgage:

1. Check Your Credit Reports

Start by pulling your free credit reports from all three major bureaus—Experian, Equifax, and TransUnion—at AnnualCreditReport.com. Scan for:

• Inaccuracies or errors

• Accounts you don’t recognize

• Late payments or collections

Pro Tip: Dispute any errors right away—cleaning up your report can raise your score quickly.

2. Know Your Credit Score Range

While requirements vary by lender, you’ll typically want a credit score of at least 620 to refinance a conventional loan. But for the best rates? Aim for 740 or higher.

Even small bumps in your score could save you thousands over the life of your loan.

3. Pay Down Credit Card Balances

One of the biggest credit score boosters is lowering your credit utilization—how much of your available credit you're using. Ideally, keep your balances below 30%, or even better, under 10%.

This quick fix can have a major impact on your score in just a few billing cycles.

4. Avoid Opening New Credit Accounts

Every time you apply for new credit, your score can take a temporary dip. In the months leading up to your refinance application:

• Don’t apply for new credit cards or loans

• Don’t co-sign for anyone else

• Avoid any large purchases that require financing

Keep your credit activity minimal to maintain stability.

5. Make On-Time Payments a Priority

Lenders want to see a consistent history of on-time payments. If you’ve struggled in the past, now’s the time to tighten up.

Set reminders, enroll in autopay, and make sure no due date slips through the cracks. Even one late payment can hurt your score right before you apply.

6. Avoid Closing Old Accounts

It might seem like a good idea to “clean up” your credit by closing unused cards—but hold off. Older accounts help your credit age, which is a factor in your score. If the card has no annual fee, leave it open and use it occasionally to keep it active.

7. Talk to a Lender Before You Apply

Before you officially submit your refinance application, consider a soft credit pull with a lender or mortgage broker. They can offer tailored advice, tell you what rates you currently qualify for, and let you know if waiting a month or two to improve your score could make a difference.

Preparing your credit for refinancing is all about planning ahead. Give yourself a few months to polish your profile, reduce your debt, and show lenders you’re a trustworthy borrower. The payoff? Better interest rates, lower payments, and more financial freedom down the road.

Thinking about refinancing soon? Start your credit prep now—your future self will thank you.