In the analysis of industrial and scientific data it is often useful to be able to formulate a detailed model for the given data. The mixed model theory provides with this flexibility. In general terms a mixed model can be written as y=Xb+ Zu +e, where X and Z are the design matrices. b is the fixed effects parameters, while u is the random effects parameters. The standard methods assume that the data provide with a full rank model. Thus the traditonal estimation methods break down, when the data show reduced rank. The idea of the H-method is to build up a solution by parts, where each part is optimized with respect to prediction aspect of the model. The estimation in mixed models stops, when predictions derived from the model can not be improved by including further parts. The significance testing becomes more reliable, when the parameters have been estimated in a model that gives stable predictions.