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Your credit score is the most important factor in determining the interest rate you receive on a loan. Taking the time to make sure your score is as high as possible can help save you a lot of money. Even just one half of a percent difference in the interest rate could save you thousands over the term of the loan. So, how can you make sure your credit score is in good shape before you apply for a loan?

Sign Up for Free Credit Monitoring

You can't change what you don't know. The first step in earning a higher credit score is to know everything in your credit history. You can get a free credit report and scores online at Credit Karma.

They also offer free credit monitoring that alerts you each time there is a change in your credit score, a new credit inquiry, new accounts, or anything else that impacts your credit score. Here is a list of items that will hurt your score and how long they remain on your credit report:

• Late/Missed payments: 7 years
• Bankruptcies: 7 years for completed Chapter 13 bankruptcies and 10 years for Chapter 7 bankruptcies
• Foreclosures: 7 years
• Collections: ~ 7 years, depending upon the age of the debt
• Public record: ~ 7 years, unpaid tax liens can remain indefinitely

Check Your Credit Report for Errors

Mistakes on consumers credit reports are shockingly common. The Federal Trade Commission conducted a study that showed one in five consumers had at least one error on one of their credit reports from the three major credit bureaus. And 33% of those consumers saw an increase in their FICO score when the error was corrected.

This means there is a decent chance you may have a mistake on your report that is hurting your score.

Go through your credit history closely and make sure there are no accounts that you're unfamiliar with. If you do find mistakes you can contact the credit bureau to dispute the information. Some common reasons to dispute a line on your credit score are:

• Someone opened an account in your name
• One of your existing accounts were stolen
• A bank, collection agency, or vendor made an error

They have 30 days to investigate the dispute. Here are the phone numbers for each of the three credit bureaus.

• Equifax: 1-888-548-7878
• Experian: 1-888-397-3742
• TransUnion: 1-800-916-8800

You can also file disputes online:

• Equifax: https://www.equifax.com/personal/disputes/
• Experian: https://www.experian.com/disputes/main.html
• TransUnion: https://dispute.transunion.com 

Keep Your Credit Utilization Ratio Below 20% 

Your credit utilization ratio is the amount of credit card debt you have divided by your credit limit. Basically, the higher your balances are the lower your score will be.