Your credit score is one of the most important factors determining the mortgage interest rate you will qualify for. Many homebuyers do not know their credit scores; not knowing your credit score is a mistake that can cost you thousands of dollars. Here are tips to help you save money and qualify for a better mortgage interest rate.

Your credit score is an important aspect of your finances. This score is calculated based on the contents of your credit records maintained by the three credit agencies of Experian, Equifax, and Trans Union. Your credit score is based on your payment history and your debt-to-income ratio. Your credit score will determine if the mortgage lender will approve your application and what the terms and interest rate on the loan will be.

You credit records contain a history of your debt, whether or not you paid it back, and how timely your payments were. This is information is prone to error; it is extremely important to review your credit records for errors before you apply for any type of mortgage loan. You should request copies of your credit records from each of the three credit agencies and review the records with a fine tooth comb for any discrepancies. You can improve your credit score by paying down the balances on your debts and making all of your payments on time.

Your credit score affects the terms you will receive on your mortgage in addition to your interest rate. Many lenders require that you to pay discount points to qualify for a certain interest rate. A discount point is 1% of the loan amount you are applying for. Whether or not a mortgage lender requires you to pay this fee depends largely on the state of your credit.

The interest rate a lender will offer you is based largely on your credit score. Mortgage lenders use your credit score to determine how much of a risk you are for lending. If you have poor credit your interest rate will be higher than a homebuyer with good credit. If you have poor credit it is possible to change your credit score before you apply for a mortgage. If you take the time to clean up your credit before applying for your mortgage you can easily save yourself thousands of dollars by qualifying for a better interest rate. You can learn more about your mortgage options, ways to clean up your credit, and common mistakes to avoid, by registering for a free mortgage guidebook: Five Things You Need to Know About Your Mortgage.