What type of credit are mortgage lenders looking for?

Lenders prefer borrowers with low balances, a long history of on-time payments and a mix of credit utilization — for instance, a car loan and a couple of revolving accounts such as credit cards.
Lenders look at several variables on the credit report: outstanding debt; the outstanding debt relative to the total available debt; the length of the credit history; and the pursuit of new credit — how many inquiries are on your report.
How to clean up your credit?
Ideally, you’ll check your credit report a year or so before buying a home. That gives you time to correct errors in the report and change ways you use credit to improve your score.
Get credit reports from Equifax, Experian and TransUnion. Make sure you get reports from all three. The information they contain can vary. Scour everything from the way your name is spelled and previous addresses to checking that each and every account is yours and reported correctly. If an account has been closed, make sure that is accurately reported.
Correct and wait.
All three credit bureaus make it easy to dispute errors online.
If everything is correct, pay down balances and let time do the rest.
The credit reporting agencies do charge a fee if you want to know your credit score, lenders look at all three scores and use the middle one.
What else you can do?
If you’re buying a home soon, try not to apply for new credit. Though it’s not always avoidable, for instance, if you need a car loan or college financing, you should resist opening several new lines of credit in a short time. Multiple new accounts can decrease your credit score.
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More Information on credit reports and credit scores
Consumer Financial Protection Bureau
How do I get and keep a good credit score?