Your credit score holds a lot of power over your buying ability, especially when you’re looking to purchase a house. If a home loan is in your future, the first step is to check your score before you apply.          

Rob Messenger, senior vice president of Title Mortgage Solution, says, “The magic number is 740. That should allow a buyer to get the best rate for a mortgage. The lower the score, the higher the rate, or the higher discount points you pay. Under 620, there are few programs out there that can help you get a loan.”

The following factors comprise your credit score:

• 35 percent is your payment history. How often did you make late payments?

• 30 percent is how much you owe on each of your accounts and how close you are to your limits.

• 15 percent is your credit history, including how long you’ve had each account.

• 10 percent is what type of credit you have, such as car loans, credit card debt, student loans, and mortgages.

• 10 percent is how many new accounts you have or have tried to apply for recently.

Federal law allows you to get a free credit report once a year, but it doesn’t include your credit score. You can get your number free online from Credit Karma or for a fee from the credit reporting companies Equifax, Experian, and TransUnion. (Here’s the catch: each company’s numbers will be different since they use their own calculation formula.) In addition, many credit card companies such as Capitol One, Chase, and Discover will now keep customers up-to-date on their credit scores.

What can you do to raise your credit score? Here are five tips:

1. Pay your bills on time. If you’re behind, catch up as quickly as you can.
2. Clean up any errors on your credit report.
3. Don’t close out unused accounts, especially if you’ve had them a long time.
4. Don’t max out your credit cards. Keep your balances low, but don’t pay all of them off to show some credit activity.
5. Don’t open new accounts.

A major mistake made by soon-to-be homeowners is obtaining new credit before closing on the house. Lenders check credit scores at both the beginning and end of the process. For example, if you buy new furniture on credit before closing, it could drop your credit score low enough to put the house purchase in jeopardy.