Last time we looked how lenders determine your rate and your credit worthiness based on your credit score. We suggested that you order your credit reports from the “big 3” credit reporting agencies.

When you receive your credit reports look for mistakes or anything else you can challenge. According to a CBS News report, about one out of every five credit reports contain errors. The study also found that one out of 10 of these errors are serious enough to diminish the consumer’s chances of obtaining credit.

Common errors found in credit reports include:

• Other people’s accounts listed as the consumer’s.
• Incorrect personal information, such as birth date and social security number.
• Closed accounts listed as open, with outstanding debt.
• Accounts in good standing aren’t listed in the report.

Dispute anything in your report that appears to be a mistake. The credit reporting agencies, by law, must investigate your dispute and correct inaccurate information within 30 days.

Your FICO^® Score

Thankfully, your credit score isn’t etched in stone but rises and falls according to how you use credit. There are several ways to boost your FICO^®.

Start by paying off accounts that you’ve fallen behind on. Late pays count heavily against mortgage borrowers. Here are a few other ways to help clean up your credit history:

• Pay down other debts, starting with the one with the highest balance.

• Pay down credit card balances that are at the credit maximum and keep the balances low.

• Don’t close old credit accounts – they’re good for your score.

• If you don’t have a credit card, apply for one, use the credit sparingly and pay the balance every month. Applying for the card will lower your score but if you use the card responsibly, your score will rise.

Although these tasks may seem time consuming, if they raise your credit score a few points, it will be worth it when you go to apply for a mortgage.

Even after a bankruptcy, 'it's not uncommon for people to see their credit scores skyrocket up into the 700s if they have absolutely no late payments or collections,” says Chris Bridges, former credit and identity theft consultant with Vision Credit Services in Washington, D.C.

Please join us next time for Step 3 in the home-buying process.