Fixed-wavelength magneto-optical measurements of hysteresis loops based on phase modulation techniques is a standard method of investigation for thin ferromagnetic films and multilayers. We show that the most common light source employed, i.e., the multimode 632.8 nm HeNe laser, has very poor stability properties which strongly limit the overall sensitivity. Solid state diode lasers constitute a good alternative for immediate replacement. New generation, high luminosity light-emitting diodes are an excellent alternative which requires only minor adjustments in existing setups.