The good old days of no-doc mortgage loans are gone.  This is mainly due to banks handing out loans like candy to people that lied on their applications.

Prior to 2009, getting a great mortgage rate required a 600 or better credit score.  In April of 2010, 720 or better is the desired score.  Reaching this new magic number is a must for anybody desiring a new home loan or a credit card with a decent rate.

Whether your credit is poor or you are on the cusp of getting to that great rate, there are steps that you can take to improve your credit.  The most important and obvious thing to do is to pay your bills on time.  Aside from that, here are three easy steps to improving your credit score.

Step One

You should see what the lenders see.  You can do this by getting a copy of your credit report from the three major credit bureaus.  Those bureaus are Equifax, Transuinion, and Experian.  According to federal law, each of these credit bureaus must provide you with a free credit report once a year.  You can also get a free credit report if you were denied credit as a result of what is on your report.  The best place to start is at annualcreditreport.com.

Step Two

Almost all consumers have errors on their credit reports.  Maybe you paid off a bill and it is still showing as unpaid or maybe your credit report shows a late payment, but you have no recollection of ever being late.

If you find any wrong information on your report, you have the right to dispute that information.  You can do so online at each of the credit bureaus’ websites.  You may also take it a step further by sending a certified letter to each of the bureaus pointing out the errors.  Once the dispute is received, the credit bureaus must investigate.  This investigation may take thirty days, so be patient.

Step Three

Bad credit will cost you money and maybe even your dream home, so it is imperative that you clean up your reports as best you can.  If you were unable to clear up any errors by disputing your report with the credit bureaus, then it is time to go direct to the creditors or collection agencies that are reporting the information.

It is best to use certified mail when dealing with collectors.  Ask each collector to verify the debt by sending you a copy of the agreement that bears your signature.  If the creditor fails to do so in a reasonable amount of time, then by law, they must remove the debt from your credit report.  Note that sometimes it is more trouble than it is worth for the creditor to gather and send a copy of this information.