Improve credit to get better mortgage rates... How?

If you are in the market for a new mortgage loan whether you are refinancing or purchasing new property, your credit score has a direct impact on the rate you get and the mortgage programs you qualify for. Unfortunately, credit scores a slow to improve but quick to go south. Here are some tips on how to improve your credit score. The earlier you do these the better... be proactive even before you need a mortgage.

REVIEW YOUR CREDIT REGULARLY AND ADDRESS ERRORS

• KNOW YOUR SCORE: Be familiar with what your credit score is. By law, you're allowed one free credit report from each of the three major bureaus -- TransUnion, Equifax and Experian -- every 12 months.
• ADDRESS ERRORS: Errors do happen and you want to learn about them and fix them as soon as possible. For this purpose you may even want a credit monitoring service. If you come across an error you will want to dispute them with the credit bureau. To do this, submit a dispute letter accompanied by any documentation you have that helps support your dispute and attach a copy of the credit report with the error (highlight that error to call it out). You should also contact the creditor that the error was related to and provide the same documentation to them that you did the credit bureau. Unless they consider the dispute to be frivolous, credit bureaus are required to investigate the dispute, which usually happens within 30 days, notes the Federal Trade Commission.
• FOLLOW UP: Monitor your credit to ensure this is resolved and does not continue to show as an open or disputed item after the matter has been closed.

EDUCATE YOURSELF ON CREDIT SCORING
You will notice that different credit reporting vendors may show slightly different credit scores for you. However, the FICO score is used by “90 percent of top lenders when making lending decisions,” according to myFICO.com, the consumer division of FICO.
Your FICO score is calculated using both positive and negative information in your credit report. There are five main components to your credit score:

• Payment history: 35% weighting
• Amounts owed: 30% weighting
• Length of credit history: 15% weighting
• New credit: 10% weighting
• Types of credit used: 10% weighting

Every lender establishes its own criteria with regard to underwriting new loans and managing existing loans and credit scores are normally only one factor among several that lenders consider when making lending decisions.
PAY DOWN DEBT 
Mortgage Brokers share that keeping your debt balances at or below 30% is viewed as a positive thing. As you look to prioritize what debt to tackle and reduce first, focus on revolving unsecured debt. Having lower debt to income ratios helps your credit rating significantly.
PAY BILLS ON TIME
In addition to bankruptcy, foreclosure and judgments, collections and habitual late payments are the worst things to see on a credit report. Once you have a delinquent payment recorded on your credit record, there is nothing you can do about it other than to try to demonstrate a long running without any delinquent incidents. As such, it is best to avoid having any late payments to begin with. If something unavoidable happens, proactively reach out to creditors to make arrangements for payment before they report it late. 
BE SELECTIVE ABOUT USING CREDIT FOR PURCHASES
Apply for credit ONLY when you absolutely need it. Be aware that some types of credit are viewed as "better than others" and establishing a history of on-time payments and demonstrating declining balances can actually help your credit. Try to keep revolving credit card accounts to a minimum. Credit grantors and mortgage companies tend to view multiple revolving accounts on a credit report as risk and potential for overspending.
DON'T OPEN OR CLOSE ACCOUNTS PRIOR TO APPLYING FOR A LOAN
If you have a fair amount of credit accounts, you will certainly want to focus on reducing the outstanding debt but should not close any of those accounts in close proximity to applying for a loan. One way that closing an account can impact your credit score is the credit utilization calculation. If the balances on remaining credit cards stays the same, then the consumer's utilization rate will increase, which may may lower your FICO Score. The more obvious one is to not open new credit in close proximity to applying for a mortgage, that includes buying new appliances on credit... new cars... etc.
FOCUS ON CREDIT LONG BEFORE YOU NEED TO
Managing your credit on an ongoing basis and being considerate of the above areas allows you to play offensive with your credit and avoid reactive situations where you have little or no ability to influence it.