Low Credit Scores May Hurt Refinancing Homeowners: Report

Although ""Freddie Mac"":http://www.freddiemac.com/ did away with minimum credit scores for refinancing borrowers in early January, a small amount of equity on a home with scores below a certain level can still make it difficult for homeowners to secure mortgages, FreeScore.com said Monday.

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In a statement, the Web site said that borrowers with credit scores below the mid-600s could pay higher interest rates or larger down payments, if their home equity averages anywhere around 20 percent.

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""FreeScore.com"":http://www.freescore.com/ said that Freddie Mac sees scores between 770 and 850 as ""very good,"" while credit scores above 700 are simply ""good"" for borrowers.

""Despite the announcement by Freddie Mac, you can still be refused for a mortgage. So, homeowners should monitor their credit scores and be aware that actions like opening too many credit cards, or increasing a credit card balance, can negatively impact your scores,"" Carrie Coghill, director of consumer education for the Web site, said in a statement.

""And, of course, missing and late payments can also affect scores. It is something to be aware of ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô Freddie Mac's announcement does not mean that you automatically get a mortgage,"" she added.

FreeScore.com found in simulations with adults ages 18 and above that a new credit card account at the $2,500 limit could help minimize credit scores by as much as 52 points.

It also said that upswings in credit card balances by $2,000 could reduce credit scores by 68 points or more.

""The effect of a 40-point drop could be paying $9,057 more on a $200,000 30-year fixed mortgage,"" the Web site added.