Your credit report contains a set of credit scores that have a direct impact on the availability and the terms of a home equity loan, refinance, or second mortgage. The higher your credit scores are, the better the rates will be. For a higher loan to value, credit scores can have an even greater effect.

Credit score information is provided by 3 national credit reporting bureaus: Transunion, Equifax, and Experian. Their computer risk models track how typical borrowers will pay their bills, and identify specific payment patterns, forecasting the risk.

Credit scores are based on five main categories of information:

1. Late Payments, Delinquencies, Bankruptcy, Tax Liens, Foreclosure
2. Outstanding Debt - Ratio of balances to available credit
3. Length Of Payment History
4. New Applications For Credit (Inquiries)
5. Types of Credit in Use - Credit Card, Installment, Mortgage, etc.

Credit scores are based on a person's whole credit picture. No one factor determines a score. Your credit report is a composite of both positive and negative information such as missed loan payments, as well as loan accounts paid satisfactorily. Issues that can carry the most weight are:

Payment Performance: The fewer late payments, the better the scores. Payments that were 60 or 90 days late have more of a negative effect than a 30 day late. The age of late payments can effect your credit scores, more recent late payments are considered worse.

Credit Use: A large number of accounts can reduce your credit scores, especially if the balances are high. Using 75% of your credit limit is a greater risk than using 25%.

Payment History: A longer payment history is better for accounts on your credit report. Having recently opened a new loan or credit card could reduce your scores, as well as new inquiries.

Inaccurate information can reduce your credit score. Read about disputing credit report errors.