In Dancing with the Stars, celebrities are paired with professional ballroom dancers to compete for the highest scores for their weekly routines. If the celebrity trains hard and has some skill on the dance floor, he or she is likely to get a high score from the judges.

If you're in the market for a mortgage refinance, you'll want to partner with the highest credit score possible in order to get the best available rate, because the lender who'll judge your mortgage application will award the lowest interest rates to borrowers who have the highest scores. What does it take to make sure that you get a "10" from your banker?

Inside the credit score

According to the Consumer Federation of America, the FICO score breaks down into five parts, each responsible for a percentage of your score:

  1. Your payment history tells a potential mortgage refinance lender if you have a history of paying your bills on time. If not, it will negatively impact the 35 percent of the score it represents.
  2. How much outstanding debt you carry accounts for 30 percent of the FICO number. A lender will look at the total amount of money that you owe to creditors, and weigh that against how much available credit still remains. The more credit that you have outstanding, the better.
  3. The length of time that you've been a borrower accounts for 15 percent of your score. The longer you've been spending money, the better it looks. Chalk one up for the old guys.
  4. Each time you open a new credit card or apply for one, your credit score will be dinged. If you know that you'll be applying for a mortgage refinance in the near future, refrain from asking for new credit. This accounts for 10 percent of your score.
  5. The last 10 percent is dedicated to the ambiguous "other factors," which can be just about anything.

Credit dos and don'ts

The following tips can help make your credit score remain high.

  1. Always pay your bills on time and never miss payments.
  2. If you have extra money coming, pay down balances on high-interest accounts.
  3. Don't max out your credit card limits, and keep your balances as low as you can.
  4. Review your credit reports for accuracy and correct any errors immediately.
  5. If you miss a payment, contact your bank immediately, and pay the past due balance as soon as possible.
  6. Don't apply for any new lines of credit unless you absolutely need them.
  7. Pay down debt instead of transferring it between credit cards.

When you apply for a mortgage refinance, you want to put your best foot forward when it comes to your credit score. Don't be a borrower with two left feet, tripping all over the credit dance floor. Pay your bills on time, and stay on top of your credit report. If you do, you'll be proud to waltz home with a trophy in the form of a new mortgage.

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Published on June 8, 2009