"I have been approached by a lender to refinance at a higher rate in order to pay off debts and improve my credit score, which the lender says is 525. He says that in a few months when my credit rating is higher, I can refinance again to lower the rate. This all sounds good, what do you think?" Going ahead with this deal would violate two of my most important rules for avoiding victimization. 1. Don't respond to solicitations. 2. Don't refinance at a higher rate. There are exceptions to both rules but this deal is not one of them. Let's look at the two parts of the deal separately. Debt Consolidation: The lender would consolidate your short-term debt into your mortgage. Assuming the interest rates on this debt are high, making them a part of the mortgage would reduce their cost. It is no...
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