Your credit score, based on your credit report, basically shows lenders the likelihood that you will repay what you owe. The higher your credit score the easier it is for you to qualify for loans and the better the interest rate you will be offered. However, if your credit is not so perfect, there are ways to improve your score. One option available to you, which can rebuild your credit is to do a refinance. Refinancing with a home equity loan will allow you to pay off those high balances and high interest accounts that have a negative impact on your credit history. Consolidating debt is the closest thing to starting from scratch and can often be a better move than creating new accounts and adding more debt to your history.

Your payment history is one of the most important factors of your credit score. Lenders will look to see that payments are being made on time, that youre making at least your minimum monthly payments, and are not missing payments. Through the course of a refinance it can be a good idea to pay off accounts with late payments, bankruptcies, or collections to improve your fico score.

Lenders also look to see that your credit limits are not maxed-out. Avoid carrying a balance that are more than 80% of your credit limit because creditors may view your high balances as excessive debt that you may not be able to stay current with. Therefore, during the course of a refinance its a good idea to pay down and consolidate any debt that you can. The smaller the balances you keep the more it will reflect positively on your credit score.

After you have finished your refinance your work is still not done. You might have consolidated all your debt into your mortgage but your mortgage and other payments still have to be made. Make sure to make regular and timely payments to any creditors that you have left. This is especially important for you mortgage, which is probably one of the most highly weighted parts of your credit history.

It takes some time for your new credit history to gain momentum. With patience and timely repayments, you will likely be able to build a new credit history that creditors will look upon favorably when making decisions about your ability to handle even more credit. Make sure to apply for new credit sparingly. Shopping around for credit can have an adverse affect on your score, especially during the course of a refinance. Each time you apply for new credit and that company checks your report, an inquiry is added to your credit file. Too many inquiries can be seen as an indication that you have had trouble getting new credit or could be overextending yourself.

Don't close unused credit card accounts near loan time. If you have several credit card accounts but are only using a few of them, you'll only raise your balance-to-limit ratio if you close the unused ones. You also shouldn't open new accounts when applying for a loan if possible. If you have a short credit history or very few accounts, opening a new credit line may lower your score since you don't have a proven track record. What's more, a new account will lower the average age of your accounts, another factor in your credit score. Lenders will often look for 3 established trade lines to see that you can manage your credit and pay accounts off in a timely manner.