Credit is a subject that most people know about and use, but it is something that few people really understand. A person's credit history and score are used for many things like determining whether or not a person qualifies for a line of credit or loan, what interest rate they will be charged and, in some cases, a person's credit history can even be used by potential employers to determine if an applicant is responsible enough to be offered a job. If you own your home and you are worried that some of your current credit issues may be impacting your credit rating, consider refinancing your home.

Factors That Impact Your Credit Rating

There are many factors that impact your credit rating. The first factor is the number of credit accounts that you have. If you have too many accounts, this can hurt your credit rating. However, if you don't have enough open credit accounts, this can also hurt your credit rating. The second factor is how long your credit accounts have been open. Accounts that are less than six months old are counted against a person, whereas accounts that are several years old and that are in good standing work towards improving a person's credit rating. The account balance is another factor that can impact a person's credit rating. In this instance the ratio of the total available credit to the total outstanding balance is used to either increase a person's credit rating or to decrease their credit rating. The higher the total available credit and the lower the total outstanding balance, the better the person's credit rating will be.

Refinance Your Mortgage to Improve Your Credit Rating

If you are a home owner and you have earned some equity in your home, either by making regular mortgage payments or because your home has increased in value since you bought it, then you can cash out this equity and use it to pay down your credit card balances. If you have enough equity to pay off all of your credit card debt, then you are in a great position. However, if your equity is not adequate enough to cover all of your credit card debt, you will need to strategically select the credit card balances that impact your credit rating the most.

Your newest credit cards impact your credit rating the most so these are the balances that you should pay off first if your primary goal is to improve your credit rating. You also want to make sure that you use the proceeds from your refinancing to bring all of your credit accounts current, as this will help to improve your credit rating as well. If your primary goal is to pay off your credit card debt, then you will want to pay off the credit cards with the highest interest rates first, and then use what money is left over to pay down your remaining credit card debt.