Get your finances ready to refinance student loans

Student loan refinancing rates are near record lows, but you may be waiting to take the plunge.

It makes sense to stick with current student loan relief options that pause your federal student loan payments. But if that benefit ends as scheduled on Sept. 30 — or if you have higher-rate private student loans without relief programs — you may want to revisit student loan refinancing.

Refinancing rewards great credit and healthy personal finances. Here's how to get the best deal.

Improve your credit. Refinance lenders consider many factors to decide your interest rate. You may not be able to immediately move the needle on some of them, like your income.

But a better credit score typically means a better rate. Lenders may approve you with a FICO score above 650, but offers improve for scores in the mid-700s and above.

Look for opportunities to improve your credit score. One major factor in FICO and VantageScore scores is use: the percentage of available credit you're using. If you're above 30% of your credit, either on any one card or across all your accounts, paying down balances strategically could help your scores.

You can also make biweekly payments to keep balances low or ask for higher credit limits.

Refinance lenders usually consider debt-to-income ratio, or DTI, your monthly financial obligations divided by your monthly income.

For example, let's say you earned $4,000 a month and paid $2,000 toward rent, your existing student loans, etc. Your DTI would be 50%, which is about as high as any refi lender would like.

A lower DTI is better. So, use a debt tracker and look for monthly payments you can reduce or knock out altogether.

Can you pay off credit cards or consolidate them into a lower payment? (Don't close the accounts, which could hurt your credit scores.) Or could you refinance other debts that carry higher interest rates first, like car loans?

Watch the rates. If current refi interest rates are moving higher than you'd like — and you're positive that you want to refi eventually — apply sooner rather than later. Once payment suspension ends, interest will start again. If you refinanced at 4% a month before the end of forbearance, you'd come out ahead in less than five months. If you have private loans that lack interest waivers, check your rates now.