Establishing and maintaining a strong credit score is vital when you’re looking to buy a home or renew/refinance your current mortgage.
If you haven’t already done so, it’s important to start building your credit history, which is used by lenders to asses your ability to make your mortgage payments.
Your credit history is compiled in what’s known as a Credit Report, which provides an overall summary of your financial history and directly impacts your ability to obtain a mortgage. Any negative information on your report may adversely affect your ability to borrow money or obtain credit. This could include bankruptcies or collections, or even the amount of credit you’ve already used.
Canada’s two credit reporting agencies – Equifax and TransUnion – use the information in your Credit Report to establish a Credit Score, which is presented as a three-digit number. As a point of reference, the average credit score is in the mid-700s and a perfect score is 900. The lower your credit score, the harder is it to obtain a mortgage at a competitive rate. Therefore, maintaining a healthy credit history will influence your creditworthiness and present you as an attractive borrower to lenders.
Your ability to handle the financial burden of credit and how consistently you honour your financial obligations is critical to lenders. If you have bruised credit, it’s imperative that you make efforts to repair it before you can consider looking for a home.
5 steps to boost your credit
- Create a budget and stick to it
- Ensure you’re living within your means
- Pay your bills on time
- Consider taking out a small consumer loan and ensure your payments are consistency made on time
- Pay down credit cards and only use them for small purchases to avoid carrying a balance
Patience is key in establishing a solid credit history. It’s important to manage your credit responsibly over a prolonged period of time to demonstrate that you’re financially responsible. Be vigilant and monitor your Credit Report on a regular basis to ensure it’s up to date and doesn’t contain any inaccuracies or fraudulent activities.
Have questions about your creditworthiness? Answers are a call or email away!