Question: How Do I Refinance When My FICO Score is Low?

Question:

I’m a real estate investor in Southern California and I own a good amount of real estate. I’ve been dinged with a 30 day late which the lender refuses to remove and another where they are in process of removing it. As a result I have basically two 30 day lates on my credit report. I also have maxed out credit cards but all my payments are paid monthly. My problem at this point is that I need to refinance my properties but my middle credit score is 585. How do I refinance these properties or work with the lenders to renegotiate better terms until I can get my score up to the point to refinance?

I hope i’m making sense here. Please advise. I was down to my last couple hundred dollars and then got some money from a friend to hold me off a little while longer.

Help.

<a Answer:

Your problem is not with the 30-day late payments. At most, they’ve lowered your credit score by 5-10 points. The real culprit is the fact that you’ve maxed out on your credit cards. The FICO formula, used in calculating your credit score, assumes (rightly or wrongly) that you are one step before defaulting on your debts.

To get around that assumption, it is always a good idea not to exceed 40% of the credit limit on any one card. If you have some unused credit cards or credit lines, shift the debt around to get below the 40% threshold.