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How to Get 600 or More on Your Credit Score
Whether you're hoping to score a mortgage, a home equity loan or an auto loan, getting the thumbs-up from a lender has gotten a lot harder in recent months.

 

Thanks to the ongoing subprime lending mess, lenders have tightened credit standards. Meanwhile, however, interest rates remain relatively low, making this a good time to borrow if you qualify to do so. As of Jan. 3, the average rate on a 30-year, fixed-rate mortgage was 6.07%, according to Freddie Mac (FRE) .

 

In the first of this two-part series, we'll look at some ways to boost your credit score, a key factor in landing a loan. The second part reviews the new tighter requirements for various types of loans.

The Skinny on Credit Scores

 

Each of the three major credit bureaus -- Experian, TransUnion and Equifax -- calculate and maintain your credit score, which can range from 300 to 900. The score reflects your payment history, your outstanding debt, the length of your credit history, the number of new credit accounts you hold and the types of credit you use.

 

In general, you need a credit score of 600 or better to qualify for a loan -- and a higher score can save you money. For example, a borrower with a credit score of 760 or more might pay half a percentage point less in interest on a loan than someone with a credit score of 690.

 

Keeping Your Score High

 

You can maintain a high score by paying your bills on time and by limiting the number of loans you take out. One other thing: If you're shopping around for a loan, limit your search to a two-week period.

 

Why? Every time you request a rate from a lender, the lender will pull a copy of your credit report, which registers as an "inquiry." Multiple inquiries may mean that you're applying for multiple loans, which could be a sign that you're having financial difficulties.

 

But the credit bureaus count all mortgage -- and auto loan -- inquiries made within a certain period (14, 30 or 45 days depending on the lender) as a single inquiry. They figure that gives you enough time to shop for the best rate.

Track Your Score

 

Keep tabs on your credit report to make sure it doesn't contain any mistakes, which will reduce your chances of getting the loan you need. You can get as many as three free reports each year, since federal law enables you to receive one every 12 months from each of the three credit bureaus. (Requesting your own credit report will not affect your credit score.) Check each report for errors, and ask the credit bureau to correct any you find as soon as possible.

 

Alas, federal law does not entitle you to free access to your actual credit score. You can pay one of the credit bureaus for your score (about $12 a pop) or you can visit eLoan.com to receive a free credit score. True, eLoan doesn't use the same method to calculate your credit score as the major credit bureaus, buts its numbers should give you a pretty good idea of how the rating agencies score you.

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