Credit reports baffle many people—even those who believe they know a lot about their personal finances. If you want to purchase a home or refinance the home you live in now, your credit report is key in determining whether or not you will get a loan. Your credit report is full of information about you, how much money you have made and how much you owe. Here's a quick look at what it includes:

• Your social security number, past and present addresses and possibly phone numbers. This information is used to identify you.

• Employment information. This can go back to the very first job you had. This does not show how much money you make or have made. When purchasing a home (or making any large purchase), having stable employment history can be increase your chances of getting a loan.

• Your credit history. This will show if you have paid your bills on time, what you have paid off and what you currently owe.

• If you have ever filed for bankruptcy or been sued because you owe a debt this information will also be on your credit report.

• When you apply for a loan, these inquiries will also be on your report.

If you have been arrested or had a traffic ticket, this will not appear on your credit report. Nothing on your credit report indicates your race or other personal information such as religion or political party.

How the score is determined

The FICO store is what most banks and mortgage companies use when determining if an applicant is credit worthy. These scores come from the three main credit bureaus which are Equifax, Experian and Empirca (formerly TransUnion).

Many factors determine your credit score. Those factors include:

• Past delinquencies

• How well you paid your last bills. Were you always paying past the due date?

• How much debt you currently owe.

• Your overall credit history

• Recent inquiries into your credit.

If your score is at 720 or above, you earn an A+ ! If your score is below 620, you have to make sure you can show that you are stable and have a sufficient income. If you have filed for bankruptcy in the past or have a foreclosure in your credit report, these are major roadblocks to getting a mortgage.

Dealing with credit problems

Many people have struggled with their credit because of divorce, job loss or other circumstances. If you have had credit problems, be honest with your mortgage broker. Many times if you have overcome these problems they will not be counted against you.

If you know your credit score need improvement, you can help yourself—but don't expect a quick fix.

• Make sure you pay your bills on time. Even if you haven't done so in the past, if you show that you have started making your payments in a timely fashion, you could earn some points.

• Pay down your credit cards if possible. Stay as far below the limit you can.

• Close credit accounts you no longer use.

• Get a copy of your credit report. Make sure that everything on it is accurate.

• Credit inquiries do affect your score. Have as few as possible.