If you intend to buy a new home or take out a loan so for any other reason, you obviously want to have the best credit rating to get the lowest interest possible.

Here are some ways for you to improve your credit score.

– Pay your bills on time. Whenever you pay a bill late, it can harm your credit score. Use automatic monthly payments with reliable service companies.

– Pay your credit card bill in full each month rather than carry a balance.

– Keep your credit usage below 30% of your credit limit. One way to do this is to ask some of your creditors to increase your limit.

– Don’t apply for too many new accounts. Even if you apply for a new account and are not approved, it can hurt your credit score.

– Review your credit report, and dispute any errors. There are three credit reporting agencies, Equifax, TransUnion and Experian. At no cost, once a year, you can request a credit report from these companies. If any errors in the report hurt your credit rating, ask for a correction to be made as soon as possible.

– If your credit score is too low to obtain a new traditional credit card, you can obtain a secured credit card. With this type of credit card, a credit limit will be established, and you will have to prepay this amount in advance. However, once you demonstrate that you can use this account responsibly, you should be able to establish new traditional credit cards.

Because inflation is under better control now, the Federal Reserve is likely to reduce interest rates in 2024. The average 30-year fixed rate mortgage had dropped to about 6.7% at the end of January, according to Freddie Mac. As a result, obtaining a 6% rate may be possible soon if you have established a good credit rating.

A better rate will reduce your lifetime cost by thousands of dollars. For example, according to Bankrate, if you have a credit score of 760 or above, it is conceivable that you could obtain a mortgage with a 6.33% rate now. Comparing that rate with a mortgage of 6.95%, which might be the best rate available with a lower credit score, the difference in payments for a $300,000 mortgage for a 30-year term would be more than $44,000.

Another way to lower your interest cost is to use “mortgage points.” Each point represents 1% of the loan amount; you can pay points up-front to the lender. One point on a $200,000 loan would cost $2,000. Each point lowers the interest rate by a quarter of a percentage point for the life of the loan. If you are planning to refinance the mortgage in a short time frame, paying points is less desirable.

Generally, you can obtain the best interest rate on a mortgage from a financial institution where you maintain several other accounts, such as investment accounts, savings accounts or checking accounts.

However, you have to be careful to understand the financial institution’s requirements to obtain a lower interest rate. If there is a requirement to maintain a very large account minimum, it may not be worthwhile. If the financial institution is offering a lower rate only if you have them manage a large investment portfolio, for example, I would be hesitant to agree to that condition.

Don’t assume that your bank is offering the best mortgage rate. It’s best to investigate multiple financial institutions. However, it would be best to obtain the best rate without having to commit to a large account balance for accounts you may not want to maintain.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.