Your credit report holds important information about your financial health which lenders and banks will check before they agree to loan you money. As a result, it plays a major role in getting approved for a home mortgage. Equifax is the main credit-reporting agency used in Western Canada while TransUnion is used more often in Eastern Canada. These credit bureaus will rate your credit using a scale from 300 to 900, where higher scores signal better credit and less risk for the lender of your mortgage or loan thus increasing your likelihood of receiving one.
Your credit score can change on a regular basis so it’s good to have a general idea where you sit on the rating scale. There are ways to maintain a good credit score which should become standard practice when managing your finances.
1) Always pay your bills on time because your credit score will reflect missed payments. If a collection agency has had to collect an unpaid bill from you that will also affect your rating. Ultimately you should try to establish a payment schedule for all your regular bills to avoid missing a payment deadline.
2) Pay your bills in full or at least pay the minimum amount required by a lender or a service provider if you must carry a balance.
3) Limit how many credit cards/loans you apply for since many lenders pulling your credit in a short amount of time can negatively affect your score.
4) The longer you have had a credit card/line of credit the better, as long as your payment history has been strong.
5) Keep two trade lines/credit cards at all times as long as you can maintain timely payments.
6) Keep your balance owing less than 75% of the total limit. The more credit you have that goes unused the stronger the investment you are for lenders.
7) Avoid going over your limit at all costs.
Feel free to contact us if you have any questions about how your credit score might affect your ability to get approved for a mortgage.