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As you know or might learn, there are numerous problems that will exist if you have bad credit. They are more damaging when you are attempting to get a mortgage. First, many people wait too long to refinance their current mortgage. Do not wait until your credit report has degenerated to a disaster level. If you are getting into credit problems and can't immediately fix them, refinance your home quickly while you still can qualify for a decent rate and might generate sufficient cash to fix your declining credit. If you have already waited longer than you should have, you must try to save your home at all costs IF you can get a mortgage that you can afford.
With bad credit, you will have a limited ability to get other loans, either credit card or installment, which otherwise might have helped you fix your original credit problem. This may leave a bad credit mortgage as your only choice. Understand that it will be expensive, one to three per cent higher than current interest rates, but may be your only option. Your equity in your property is real and serves as an untapped resource that you may need if things get worse. Again, do not assume that you will be able to get a good consolidation loan to solve your problem since your credit problems may make it impossible.
The solution: a) Design a plan – and stick to it at all costs – to fix your credit in the next six months to one year. b) Refinance your property at the best terms available to you and use any available proceeds to begin your credit fix plan.