Debbieann- Pattiann is right, it is not necessarily the tension and, frankly, there are lots of reasons it is fraying.
The thread might be very old and therefore, dried up. It might be a poor quality thread and of course, your needle could be dull or have a burr in the eye. If the machine has not been in use for a long time, I strongly recommend that you have it serviced by an embroidery technician. You are probably aware that sewing and embroidery are really different processes.
Please read my forum post for the PE-700. There are plenty of tips to help you learn about your machine. Additionally, I have a blog which covers many topics in embroidery and this one, 'What I Wish I Had Known. . .' is great for a newbie. So, read, ask questions in this forum, and then read more. If you have the manual, it has lots of info in it as well.
This is the best group on the Net, and I am proud to be associated with it!
Pat, The Avid Embroiderer