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How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

The first step to improving your credit rating is to review your reports and score.

Give yourself some credit: Upping your score for a home loan

Getting a mortgage is a reality for most homebuyers. If you plan to obtain a home loan, your credit history will play a large part in whether you're approved, the amount you can receive and what interest rate you get.

Whether you don't have much of a credit history or your details include a few blemishes from the past, you'll want to improve your financial background as much as possible before visiting a lender. Here are some tips to get you started:

Check your credit reports and score
Before you can improve your credit rating, you need a sense of where it stands. You can obtain this information via your FICO score and credit reports.

Your credit rating is a three-digit number that helps determine your creditworthiness. It's composed of five components – outstanding debt, credit types, credit history length, new credit amount and payment history – all of which account for varying portions of the figure. Scores at 700 or higher are generally considered good. Some resources allow you to get your credit score for free, but make sure you read the fine print.

Credit reports give a detailed history of all of your accounts, including cards, loans and financing for large purchases, such as furniture and vehicles. They tell you about active and closed accounts, as well as remaining balances. Some credit reports even include rent payments now. Three major credit reporting agencies – Equifax, Experian and TransUnion – aggregate this information, and you get a free copy from each one annually. Check each report, as they don't always have the same data. Also, look out for fraudulent accounts or disputable errors that could impact your ability to get a home loan.

Pay your bills on time
This tip seems simple enough, but it's an important reminder. Whether you're already behind on payments or could have a delinquent one in the future, try to keep up with your bills. Even consider paying ahead of time.

If possible, pay more than the amount due to reduce your outstanding debt faster. It's good to have some credit in use, but you want to keep your balances low.

Utilize underused accounts
Remember that department store credit card you opened last holiday season to get a discount on your purchase? What about your card you keep for emergencies? If you don't take advantage of this credit, you might think it's wise to close the account before applying for a mortgage.

You're actually better off keeping these accounts open. Your credit utilization ratio, which compares your used to available credit, looks positive to lenders when you have access to a lot of funds and a relatively small amount in use. Aim for a ratio of 30 percent. 

So buy a pack of gum or a t-shirt and pay off the bill to keep your accounts open. Also, strategize how you'll pay down higher debts to spread out your outstanding payments while utilizing all of your credit options.

Take these steps and others to improve your credit rating, and get started as soon as possible ahead of your house hunt.

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