Refinancing your 1st and 2nd mortgage loans can be an effective way to re-establish your credit, particularly if you have recently declared bankruptcy or otherwise have bad credit.

Fortunately, the underwriting standards for many secondary finance sources has eased, and you may qualify for an equity loan through a sub-prime lender, sometimes called as "bad credit" specialists, as early as six months after your bankruptcy discharge.

Home equity lenders classify borrowers into the following credit categories based upon their credit scores. These categories may vary slightly among home equity lenders. A few non-conforming lenders offer B, C, and D credit, which means they offer credit to high-risk borrowers. For taking on these high-risk loans, sub prime lenders charge somewhat higher interest rates and fees.

Credit Rating Credit Score

A+ 700

A 670

A- 640

B 620

C 580

D 550

E 520

Providian Financial estimated that consumers with an average score would reduce card finance charges by $76 annually if they raised their score by 30 points. Debt refinancing with sub prime debt consolidation loans alone can help raise your FICO credit scores by at least 30 points, especially if you are diligent about keeping up with the monthly payments.

Consider refinancing now and rolling in your current second mortgage (home equity loan or line of credit) into a new 1st mortgage loan while cashing out on equity to consolidate credit card debts. You might immediately save a fortune. With the new minimum monthly payments being implemented by credit card companies, the savings could be even greater if you refinance now.

Paying down debt and making regular, on-time monthly payments are the fastest ways to re-establish good credit. Fair Isaac & Co. states that paying down your credit card balances by just 34% could raise your scores by almost 20 point, and paying your bills on time for 6 months could raise your FICO scores almost another 20 points. So, after making your payments in a timely manner each month for at least 12 consecutive months, your credit score should have risen quite a bit above the sub prime rate range.

Now is the time to replenish your credit score and start rebuilding your credit history. You can still refinance for an interest rate for less than what you are paying with revolving credit cards.

Do more research online and you will find insightful information and get more tips about loan approvals and underwriting guidelines for a sub-prime credit and equity loans. This is the first step that could save you money by lowering your monthly payments.