Lenders are often concerned with one thing when it comes to credit -- your credit score. 
Not only are mortgages hard to get, but so are home equity lines of credit and refinance mortgages. Before you apply for a home loan or refinance your existing loan, improve your credit score for the best chance of securing a loan at a competitive rate.

FICO Score

Your FICO credit score is what lenders use to determine whether or not you will be approved. The scale ranges from 300 to 850, with 850 being the highest credit rating. A higher credit score also means a lower interest rate, which can save you a considerable amount of money on your mortgage over the life of the loan. 

Some lenders will give home loans to people with credit scores of 680, but a score of 720 will give you a much better chance for an approval. The minimum score banks use to determine eligibility can change each month, however. 

Know Your Score

You need to know your FICO score before you can improve it. There are three credit bureaus, and you can request a copy of your score for free once a year from each one. Financial experts recommend that you get a free copy every four months so you know where you stand. Your score may vary slightly for each company, so keep that in mind when comparing the reports. You can request a free copy at Your credit report is free, but you will have to pay about $15 for your FICO score. 

Information on your credit reports includes current balances, the date you opened each account and whether you pay on time each month. 


Mistakes can and do happen, so check your report carefully. According to the United States Public Institute Research Group, up to 25 percent of credit reports contains serious errors. 

Read your credit report carefully. If you notice an error, write a letter to the credit bureau. Include supporting documents, such as copies of statements and receipts so the credit bureau can investigate the error. 

Calculating Credit Score

Calculating your credit score is complicated, but your payment history has the most influence. Making your payments on time will help improve your score. If you forget to make payments, set up automatic withdrawals from your checking account to avoid a hefty late fee and possible damage to your credit score. 

If you have late payments on your record, you can improve your score by paying on time in the future. The older negative information is on your report, the less it lowers your score. 

Old Credit 

Most financial advisers do not recommend that you close old accounts, even if you have a $0 balance. Long-standing lines of credit can improve your credit score, so old accounts can improve your score even if you are not using them. 

Your credit score is also based on the difference between the total amount of credit available to you and how much you are currently using. When you close an account, you are using a higher percentage of your credit, so your balance looks higher. Aim to only use about 10 percent of your available credit. 

Your FICO is partially determined by how you do manage your credit. The longer you have had credit and managed it well, the better your score. If you have old credit cards that you no longer use, make a purchase once every six months to keep the credit line active. 

New Credit

When you are trying to raise your credit score, don't apply for new credit cards. When a lender pulls your credit score for a new line of credit, it can lower your score by a few points for up to a year. 

Younger people who have not had credit for very long will be negatively impacted by applying for new credit more than those who have had credit for 20 years or more. 

It's tempting to sign up for a store credit card to save a percentage off of your first purchase and get savings throughout the year, but they can really damage your credit score. These lines of credit are often very low, so just a few purchases can max out the card and lower your credit score. 

Credit Repair Companies

Before you turn to a credit repair company, do some research. The Better Business Bureau reports that complaints against these companies are rising. 

The companies claim to repair your credit and erase bad marks on your report for a large fee. Some will even say they will get you a new social security number or allow you to use someone else's good credit to improve yours. These are scams, and you will waste your money in fees. 

There are legal ways to improve your credit, but you don't need a company to do this for you. By following the tips mentioned above and making your payments on time, you can improve your score for free without using a company to help you.