The first thing you should do before applying for a loan is go to AnnualCreditReport.com and get your credit report from all three credit bureaus to make sure that there is no inaccurate information that could be damaging your credit score. Everyone is entitled to a free credit report from each bureau every 12 months. You want to be sure to check all three because, although it is a good sign that one of them is accurate, there can be discrepancies so don’t assume that they will be the same.

The next thing you should do is maximize the positive information that is consistently being reported to the credit bureaus (and therefore on your credit report). If there is negative information on your credit report, unfortunately it is not under your control to remove it. Negative information will be removed from your credit report automatically 7-10 years after it was first reported. If this is your situation, it is even more important to increase the flow of positive information in order to dilute the negative.

You can increase the positive information on your credit report by staying current with your payments on your existing credit accounts (e.g. credit cards, auto loans, etc.) and keeping your balance-to-limit ratio low on your existing credit cards. Keeping a low balance-to-limit ratio means using less credit than is available to you.

If you have 3 credit cards or less (in good standing) you may want to consider getting an additional card to increase the amount of positive information being reported to the credit bureaus on a monthly basis. You don’t even have to use the credit card for it to count as positive information on your credit report. As long as the credit card is open and in good standing, you will be reported to the credit bureaus as being current on your account regardless of the balance.