Today one of the most important factor in obtaining the lowest rate is having a high credit score. Usually a score of 740+ will get you the lowest mortgage rate and a score of 775 will qualify you for the lowest rates on any loan.
It is helpful to think of credit from the lenders perspective. Their only question is: "Will this borrower keep their promise to pay me back?" In the measure that your track record proves that you will, the lower the interest rate will be.
CreditKarma.com offers a free score from TransUnion and advice on how to improve it.
Pay On Time Every Time. Nobody runs a marathon without training for a long time, neither does anyone have a high credit score without timely payments over many years. This is THE most important factor in your score.
Sign up for automatic payments with as many bills as possible. Then just make sure your bank account is topped up.
Keep Each Credit Card Below 30% of Its Limit. 50% at the most. Paying off the highest interest one first does not improve your score as much as keeping the above rule does.
Seek to Have the Highest Credit Limits Possible. If you currently have low limits and have been paying your bills on time, consider asking the Credit Card issuers to raise your limits.
Use the Oldest Cards. The longer your credit history the better. You might have an old credit card still active but if you don't use it the issuer might stop updating the credit bureaus of it.
If you can only pay the minimum, split it in half and pay it twice a month. This will reduce your average daily balance and finance charges.
Know your credit score. It's a great barometer of your financial health.
Write to your credit card company and ask them to remove a late payment or perhaps ask them to "re-age" the card wiping out a bad history. They will only be willing to consider these if you have had about a year of on-time payments.
Don't apply for new credit if you already have plenty. Resist saving the 15% at the department store, the negative impact of the inquiry could cost you a lot more than what you save.
Don't consolidate your debts. Having a variety of loan types is helpful to your score i.e. mortgage, car loan, credit cards.
Don't negotiate a lower settlement. It may seem like a good idea but it is cataclysmic to your credit score.
Consider Rapid Rescoring. At Best Deal Mortgage we are partners with a firm that will rescore your loan instantly. This will increase your score especially if you just paid off a credit card. For a small fee we are also able to tell you what minor steps you can make credit wise and what the likely score result will be.