Better credit = better buying power

Unless you have the cash to buy a home outright, you will be relying on your credit to obtain a loan for the purchase. For most of us our good credit is something closely guarded. We want it to reflect our sense of responsibility to pay the debts we owe.

Yet, even when we are diligent black marks can appear on our credit, through no fault of our own. Identity theft, date entry errors and other problems can create negative marks on a credit report which can downgrade your score. If you are in the market for a home you will need to clear up inaccuracies quickly.

Here are four steps you can take to manage the accuracy of your credit report and leverage your best buying power.

1) Get a free copy of your credit report from all three reporting bureaus. Go to to request your free copy. Under federal law, you can receive a free copy of your credit report every 12 months.

Go through each report thoroughly and verify each item is correct, including the amount owed, your payment history, any reports of late payments and other details. If you find an inaccuracy and wish to dispute it, go here for a sample letter and the appropriate steps to take.

2) Pay your bills on time. This is the best way to ensure a good credit report and subsequent score. If you tend to be slow in making payments or are forgetful, sign up for an automatic bill pay service through your bank where payments can be made automatically each month.

3) Understand how your score is determined - and what affects it. In the lending industry, most institutions look at your FICO score. FICO stands for Fair Isaac Company, which developed and calculates the credit model.

Some factors that affect your score are: paying bills on time, how much debt you have, what types of debt you have, how long is your credit history, and have you applied for credit recently.

Although you can get your credit report once a year for free, your FICO score is a proprietary product, so in most cases you will have to pay the credit bureaus to see it.

4) Learn the legal means of improving your credit score - and avoid scams. There are lots of companies that advertise promises of cleaning up negative credit "100% guaranteed." Most of them want a fee, and they want it up front.

There are many low cost and no cost ways of cleaning up your credit report, some of which we have already mentioned above.

Identity theft is on the rise in our society. Taking steps to monitor your credit and protect your financial identity is one thing you simply cannot leave to chance.