The first step to acquiring a mortgage is ensuring that you have a good credit history, which helps secure a lower interest rate and lower monthly payments. A person’s credit score is a key indicator, and more is better than less.

A high credit score indicates strong creditworthiness, which qualifies a borrower for better interest rates on loans -- whether they are mortgage loans or credit card loans. Fortunately, most Americans have good credit. However, to improve your credit score, the American Bankers Association advises that consumers:

-- Pay bills on time. Pay at least the minimum due, but paying more is even better. Payment history makes up 35 percent of a person’s credit score, according to www.myfico.com. The longer you pay your bills on time the better your score.
            -- Watch for warning signs of credit trouble. If you pay only the minimum balance, pay late or use cash-advances to pay daily living expenses, you might be in the credit “danger zone.” For more information on debt management, contact the National Foundation for Consumer Credit at www.nfcc.org.

-- Evaluate your credit report annually. Your credit report illustrates your credit performance, and it needs to be accurate so that you can apply for other loans -- such as a mortgage. Everyone is entitled to receive a free copy of their credit report each year, but you must go through the Federal Trade Commission’s Web site at www.annuacreditreport.com, or call 1-877-322-8228.
            -- Don’t skim, read the fine print. A loan or credit card application is a contract, so read it thoroughly before signing. Be aware of introductory rates that expire as well as the length of monthly billing cycles.
            -- Ask questions. Remember that you are the customer and your lender is providing a service. If you don’t understand something, ask. It’s equally important to ask questions if you’re turned down for a loan. Find out why, and ask the lender how you can improve your changes for approval in the future.

-- Set a budget and stick to it. Developing a financial plan will help you keep your finances in order. Don’t spend more than you can afford, and don’t reach your credit limit or “max out” your cards.

            -- By all means, comparison shop. Don’t jump at the first appealing offer. Compare rates and fees offered through mail solicitation, on the Internet or at your local bank.