NEW YORK (CNN) -- From mortgages to refinancing and home equity lines of credit -- it's getting harder for people to qualify for a loan. And that makes your credit score even more vital.
Paying bills on time and setting up automated payments online can help improve your credit score.
Most lenders will look at your FICO credit score. The scores range from 300 to 850. The higher the number, the better credit you have and the lower interest rate you'll get.
Today, you'll need a higher score to get good loan terms.
"You really have to have good credit," said Bob Moulton, president of the Americana Mortgage Group.
Your credit score may have to be as high as 720 he says. "You can get credit in some places for 680. But that number gets higher every month," according to Moulton. Read excerpts from Gerri Willis' book
The first step to improving your credit is -- knowing where you stand. You can get a free copy of your report once a year from each of the three credit bureaus at https://www.annualcreditreport.com/cra/index.jsp. This is especially important if you think you will apply for a loan in six months.
Your credit report includes specific account information, like your balance, the date the account was opened and your payment pattern.
Pay close attention to detail. A study done by the U.S. Public Institute Research Group found that 25 percent of the credit reports contained errors serious enough to result in the denial of credit.
If you do find an error, make sure to put your complaint in writing, include any supporting documents and send it to the credit bureau. The credit bureau must investigate your claim and update your report if necessary. Keep in mind that your credit report is free, but you'll have to pay for your FICO score -- which will cost you about $15.
When it comes to calculating your credit score, your payment history is one of the biggest factors. So, keep making payments on time. Automate your bills online if it will help you avoid late fees. Even if you've made a few late payments, you can still re-establish a good credit score. The older the negative information, the less it counts against you.
"It may be tempting, but don't close old credit card accounts if you want to improve your credit score," says John Ulzheimer of Credit.com.
Your score also takes into account the difference between what credit is available to you and the amount you're using. If you shut down credit card accounts, the total amount of your available credit is lowered and your balances look much larger in comparison. This ratio then hurts your score.
Ideally your purchases should be within 10% of your credit limit, said Ulzheimer.
For example, if your credit limit is $6,000, don't charge more than $600.
Your FICO score also looks at how long you've been managing credit. So, the longer history you have, the better. If you have a card that you haven't used in a while, it's a good idea to use that credit card once every six months to keep it active, according to Craig Watts of Fair Isaac. This will ensure that your account is included in the calculation of that credit utilization ratio.
Improving your credit score isn't only about managing the credit you have, it's about saying no to new credit. Avoid opening up retail store credit cards. Every time you open up an account to save an extra 10 percent, you're giving the retailer permission to pull your credit score -- and that could hurt your score for as long as 12 months, according to Ulzheimer.
Applying for new lines of credit is even more damaging if you've only been handling credit for a little while. The credit score of a 20-year-old with one or two credit cards will drop substantially more than someone who's been managing their credit over 20 years.
Credit limits on retail cards are always very low, so even a few purchases, can max out the card and that can really damage your score.
Finally, be wary of credit repair companies. Complaints filed against these types of credit-repair companies are up almost 40 percent since 2004, according to the Better Business Bureau.
You may have heard about these companies on television and radio commercials or Internet advertisements. In some cases, consumers pay large upfront fees.
In return, these companies promise to erase any blemishes on credit records, get new Social Security numbers for clients, or allow consumers to piggyback on someone else's good credit record.
Don't fall for these scams. Whatever a credit repair company can do legally, is something you can do by yourself for free. E-mail to a friend
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