Are you a first time home buyer? With so many choices to make and so much at stake, it’s essential that you prepare. For advice, check out the First Time Home Buyer Guide from realtor.com® to learn the 10 steps to purchasing your first home without a hitch.

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Step 1: How to Improve Your Credit Score

Pull your credit report

Experian, Equifax, and TransUnion are the three major U.S. credit bureaus and each releases its own credit scores and reports (a more detailed history that’s used to determine your score).  Although they do pull from different sources their scores should be about the same.  For example, Experian considers on-time rent payments while TransUnion has detailed information about previous employers.

To access these scores and reports, financial planner Bob Forrest of Mutual of Omaha recommends using AnnualCreditReport.com, where you can get a free copy of your report every 12 months from each credit-reporting company. It doesn’t include your credit score, though—you’ll have to go to each company for that, and pay a small fee. Fee’s tend to range in the $25-$40 range.

Or you can check with your credit card company: Some, Capital One and Discover offer free scores and reports.  Once you’ve got your report, make sure to review it carefully, particularly the “adverse accounts” section that details late payments and other slip-ups.

Assess where you stand

Remember the better your credit history, the higher your score will likely be which means the better your ability to get a home loan. The Federal Housing Administration requires a minimum credit score of 580 to permit a 3.5% down payment, and most lenders will require at least a 620, if not higher, credit score. So what can you do if your credit report is in less than tip-top shape? Don’t worry, there are ways to clean it up.

How to improve your credit score with error disputes

A Federal Trade Commission study in 2013 found that 5% of credit reports contain errors that can negatively impact your score. So if you see anything, you can start by sending a dispute letter to the bureau, providing as much documentation as possible, per FTC guidelines. You’ll also need to contact the organization that provided the bad information, such as a bank or medical provider, and ask them to update the corrected data with the bureau. This may take a while, and you may need documentation to make your case. But once the bad info is removed, you should see your score bump up.

Eliminate one-time mistakes

Ok, so you’ve made a late payment or two—who hasn’t? Call the company that registered the late payment and ask that it be removed from your record. “If you had an oopsy and missed just a payment or two, most companies will indeed tell their reporting division to remove this from your credit report,” says Forrest. Granted, this won’t work if you have a history of late payments, but for accidents and small errors, it’s an easy way to improve your credit score.

Eliminate credit card balances

“A good way to improve your credit score is to eliminate nuisance balances,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.

The reason this strategy can boost your score: One of the items your score considers is just how many of your cards have balances, Ulzheimer says. That’s why charging $50 on one card and $30 on another instead of using the same card (preferably one with a good interest rate) can hurt your credit score.

The solution to improve your credit score is to gather up all those credit cards with small balances and pay them off, Ulzheimer says. Then select one or two go-to cards that you can use for everything.

“That way, you’re not polluting your credit report with a lot of balances,” he says.

Increase your limits

One no-brainer way to increase your credit score is to simply pay off your debt. Not an option right now?  Here’s a cool loophole: Ask your credit card companies to increase your credit limit instead. This improves your debt-to-credit ratio, which compares how much you owe to how much you can borrow.

“Having $1,000 of credit card debt is bad if you have a limit of $1,500. It isn’t nearly as bad if your limit is $5,000,” Forrest says. The simple math: Although you owe the same amount, you’re using a much smaller percentage of your available credit, which shines well on your borrowing practices.

Leave old debt on your report

Some people erroneously believe that old debt on their credit report is bad.  The minute they get their home or car paid off, they’re on the phone trying to get it removed from their credit report. Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, “arguing to get old accounts off your credit report just because they’re paid is a bad idea,” Ulzheimer says.  Good debt — debt that you’ve handled well and paid as agreed — is good for your credit. The longer your history of good debt is, the better it is for your score.  One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible. This is also a good reason not to close old accounts where you’ve had a solid repayment record.Trying to get rid of old good debt “is like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

Pay on time

If you’re often late with payments, now’s the time to change that. You do have the power to improve your credit score yourself. Commit to always paying your bills on time and consider signing up for automatic payments so it’s guaranteed to get done.  With all of life’s distractions having one less thing to worry about that is already setup, processed and ready to go is an excellent way to go.

Give yourself time

Unfortunately, negative items (such as those habitually late or nonexistent payments) can stay on your report for up to seven years. The good news? Changing your habits makes a big difference in the “payment history” segment of your report, which accounts for 35% of your score. That’s why it’s essential to start early so that you’re sitting pretty once you’re shopping for homes and find one that meets your needs.

Once you’ve set your credit on a better path, it’s time to tackle the next major hurdle: saving for a down payment.

**Ryan Wheeler is an expert real estate agent and military veteran serving buyers and sellers of homes in the Shreveport Bossier City area.  Connect With Me