How credit cards can help on the path to home ownership

When it comes time to buy a home, you'll often find that everyone from your real estate agent, to your colleagues, friends, family, and mother-in-law all want to have a say and 'help' in any way they can.

One of the best sources of help, however, is probably snuggled away in that well used wallet in your pocket.

Your little plastic credit card can have some pulling power when it comes to convincing the bank to give you a great deal on your home loan. Here's how:

A bank will use your credit rating, or credit score, to help determine if they can lend you money with some assurance that you will not default on your loan.

This score is based on information found in your credit file, which will contain a record of your financial history, including payments, outstanding debt balances, new credit, the length of any credit history and the types of credit you've used.

If you can keep your debt payments up-to-date (remember how good you said you'd be when you signed on the dotted line for your car?) and your balance-to-credit-limit ratio low, then this will help you be in a better position to ask for a loan.

You can obtain a copy of your credit rating for free from a credit reporting agency, although there may be a fee if you need it in a hurry.

Having a good relationship with your credit card can help to better your credit score, but remember the rating will also include any personal or business loans you've undertaken, previous mortgages, any mobile phones or internet plans, store cards and utility accounts.

Without a credit rating of any kind, you may find it much harder to apply for a loan as the bank won't have much to go on when deciding if you're a trustworthy character or not. Likewise, if your credit rating is too low, it can be even harder to get a good deal on a mortgage – something your mother-in-law will no doubt have a helpful opinion on.

Did you know a credit card could help you on your journey to becoming a home owner?