If you think time has come for you to buy a home for your family, one thing that you need to look is your credit score. There is no need to start your house hunting exercise before you have obtained a pre qualification letter from a lender. Interest rates are still low but to get the best mortgage, you will need to observe sound fiscal discipline so that your credit score is high.

 

1.      Make it a habit to pay your bills on time

You have to inculcate the good habit of paying all your bills, whether they are utility bills or for purchases made using credit cards, on time. You may not think much of slight delays in payment of bills but the single most important factor affecting your credit score is your history of bill payment. In fat, 35% of your credit score is dependent upon your payment history.

 

2.      Keep balances to a minimum in your credit cards

Most people have high running balances in their credit cards. They keep paying interest on this balance not realizing that it affects their credit score badly. One factor that has great bearing on your credit score is the ratio of available credit limit and used credit on credit cards. You can expect the score to be lower if you are using up your credit limit while the score is high if you use very little of the available credit limit.

 

3.      Keep the number of credit cards down to 2 or 3

Many people feel good that they own 5-6 credit cards but the practice of owning high number of credit cards is looked down upon by credit rating agencies. They feel that such individuals are not able to exercise control over their spending habits. It is better to have only 1-2 cards rather than owning 5-6 cards. Also, use these cards sparingly only when there is an emergency rather than on buying foods that you hardly need.

 

4.      A mix of loans is good

Having all loans obtained using your credit cards is not considered a good fiscal policy by credit rating agencies. Make sure that your loan portfolio is a diverse one including different kinds of loans with a good track record of paying your installments on time. You are building god credit when you are repaying your installment loans and student loans on time.

 

5.      Do not apply for loans from several lenders in short time period

It is natural for you to apply for mortgage loan in different banks when you have decided to get a mortgage loan. However, it is better to use services of a mortgage broker rather than recklessly applying for loans in many banks as it gives credit rating agencies a reason to believe that you are desperate for a loan. Apply for a fresh loan only when you have brought down the amount of outstanding loans and all of these loans are up to date.