What credit score do you think you need in order to obtain the best mortgage rates?

If you don’t know, you’re right there with 62% of consumers. Twelve percent actually believe that a score of 650 or less will get you the best rate.

Only 7% of American consumers answered correctly. A score of 800 or higher will get you the absolute best rate. Nineteen percent were close in picking scores between 651 and 800.

The highest FICO score you can possibly have is 850. MyFico.com reports that a score between 760 and 850 will get you the lowest possible interest rate on a 30-year fixed-rate mortgage. Consumers that have scores between 620 and 639 will see an interest rate of about 1.5% higher.

There are still a lot of people that don’t even know that their credit is being watched. The number of myths circulating about credit scores is astonishing. Knowing the quality of your credit is important. You must understand your credit and your score.

Your credit score is based on your repayment history, the amount of credit you have available and the amount of outstanding debt you have. Paying your bills on time is the traditional way to improve your credit score. And it works. Ignore those due dates, and your score will plummet. Bad credit financing is more expensive.

But many Americans still believe that by closing out all of your existing credit accounts, they will receive a higher score. While it sometimes helps, closing out all cards could eliminate some of your good payment history. This hurts your score.

You also want to show a good ratio of total available credit and the total outstanding debt on your cards. By closing out accounts that have low or zero balances, you are offsetting that ratio. For example, you have five accounts that give you a total available credit of $5,000. You only owe $300 on one card. Your ratio is at 0.06. If you close all four cards, worth $1,000 each in available credit, your ratio has gone up to 0.3. The closer you get to one, the more damage to your credit score.

If I were you, I would pay down that card and then close the extra accounts. If you have a high level of debt in relation to your credit, your score will go down. Reducing your credit available is not always the best thing for your credit score. And remember, any time you have accounts open that you don’t use, keep and eye on them for fraudulent charges.

Really, if you want to start improving your credit score, you should start by focusing on two things. Pay all of your bills on time and work extra hard to pay down your debt. These first two steps are so important. And don’t just pay the credit cards and loans on time; pay your utility bills, medical bills and other bills on time. These delinquencies can show up on your report. Bouncing checks also can show up. Take the time and the effort to repair your credit.

Having a higher credit score means a lot of good things are in store for you. Lower rates on loans, lower insurance premiums and the knowledge that your finances are in order helps you save hundreds of dollars. If you ever need the money, your good credit ensures that it is there.

Your credit score affects everything from the interest rates on your mortgage and car loan to even your insurance premiums. The majority of Americans don’t think about their scores. A recent survey by TrueCredit.com found that only 10% of Americans know what their score is.

The cost of not knowing your score can be high. If you don’t know what your score is, you can’t take steps to improve it. A low score can result in the denial of credit, but also certain services and even employment. Scores below 500 usually can only be financed by a hard money or private money lender.

Credit scores are compiled by three major credit agencies: Experian, Equifax and TransUnion. The scores are based on the information provided by creditors. Most scores are formulated using a system developed by Fair Isaac, a research form.

You score measures the likelihood you will repay a loan. It is based on your history of paying debts in the past.

You may think that you know credit scores, but in fact, most Americans have very serious misconceptions.

The following myths are NOT TRUE:

- The lower your credit score, the better. It’s like golf.

Not true! A high score is what you are looking for. It’s like football. A high score indicates that you are at low risk of defaulting on a loan. A low score says that you aren’t creditworthy. If your score is below 600, you will most likely have higher than average interest rates if you can get a loan.

If you have a score above 700, you will usually qualify for moderately low interest rates. If you score is above 760, you will have the lowest rates of all.

- You can improve your credit score by marrying up.

Not true! While it may be in your interest to marry well, your credit won’t benefit too much. Married couples don’t get their credit histories merged. So marrying someone with great credit is a good idea, but not one that will help your credit.

If you take out loans together, you better hope your spouse holds up his or her end of the bargain. If payments aren’t made, both of your credit scores will suffer. Plus, when you are jointly applying for a loan, such as a mortgage, both of your credit scores will be looked at.

- Improve your score by earning more money.

Not True! The amount of money you make has no bearing on your score. Your score is based entirely on you history of repaying your debts. If you are behind on your bills, you will have a bad credit score – even if you are a millionaire.

However, lenders do consider your income. They will look to make sure that you do not have more debt than you have income.

- There is little that can be done to raise your scores.

Not True! There is a lot you can do. But you have to be patient. About 40% of Americans don’t know that you can raise your scores by simply paying off a large balance credit card. Can you believe that 28% actually believe that you can improve your score by maxing out your credit cards?!

Most credit scoring calculations will look at the amount of debt compared to the available credit limits. You want to have a lot of credit available, and very little debt. If you use your credit responsibly, you will be rewarded.

The first step is to pay all of your bills on time. Every time new info comes in, your credit score is adjusted. If you pay your bills on time, it could take as little as three months to improve your score.