When you are ready to buy a home, your ability to get a mortgage isn’t just restricted by your income or how much you have set aside for your down payment.

Your credit score affects your ability to qualify for a loan to buy a new home or to refinance. Understanding how this number is calculated can give you the knowledge you need to make the best financial decisions so that you can not only get a mortgage but qualify for the best terms possible.

You should know that your credit score is comprised of many factors. The higher the score, the more favorably you will be seen by mortgage lenders. The key to having a great credit score is to pay attention to these 4 factors:

Payment history

Paying your bills on time and in full has the greatest positive impact on your credit score and therefore on your ability to get that mortgage you want. Conversely, late payments, delinquencies and charge-offs will hurt your score.

Outstanding credit card balances

How much debt you carry on your credit cards will impact your ability to get a loan or refinancing. This factor indicates the ratio between your outstanding balance and available credit. Ideally, you should keep every balance as low as possible, not only to avoid fees but to also show mortgage lenders that you are adept at managing finances.

Credit History

Your credit history indicates how long you have opened any particular credit line. This gives mortgage lenders an idea of how well you have historically addressed your finances, which in turn tells them how well you can make your mortgage payments.

Type of Credit

Variety is the key to this factor. Your credit score will be ranked higher if you have a combination of types of credit, such as car loans, credit cards, and mortgages, instead of only one type, such as credit cards.

All of your financial decisions, both new and old, will affect your ability to qualify for a mortgage. Knowing what to watch out for will help you prepare to buy the home of your dreams.