Your credit rating is one of four factors that is used to determine if you will be approved to receive a home loan. It is the single most important factor that determines the interest rate you will pay which would ultimately determine your monthly payment on your home loan.
Your credit rating and score in particular are more important than ever before with the state of the credit markets. Lenders are raising their standards to make sure they are not left with too many bad mortgages and loans.
In particular, they pay close attention to your credit scores which gives them an overall picture of the information contained in your credit report. Once you begin fixing your credit report, you are simultaneously improving your scores which would help qualify for a better mortgage rate and terms.
You want to start the credit repair process by obtaining a copy of all three of your major reports from Equifax, Transunion and Experian. Then review each one for negative out-dated accounts.
The process will involve you contacting the bureaus to dispute such accounts. Once you have placed your dispute via mail the reporting bureaus will begin an investigation into each account you dispute.
Their goal is to gather proof from the "information furnisher" AKA creditor thatave them the negative account information. If the creditor can not provide such proof then these accounts need to be deleted according to the law. Your task will be to make sure you follow up with the process and to make sure that each of the reporting agencies understands that you know your rights, otherwise they may not take your efforts seriously.