Credit plays a critical role in the homebuying process as lenders take a hard look at your ability to manage credit before determining whether they’ll grant you a mortgage – and how much interest they’ll charge.
Your credit score, expressed as a three-digit number – with a perfect score coming in at 900 – demonstrates your creditworthiness and overall financial health. Each lender sets its own guidelines in terms of the minimum credit score required but, for the most, a respectable score falls within the mid-700s. Most banks and traditional “A lenders” require a minimum credit score of 680.
If you have a low credit score, it’ll be harder to obtain a mortgage at an attractive rate, so it’s critical that you demonstrate a history of strong money management skills.
How can I boost my credit?
A record of your debts and ability to repay them is known as credit history. If you have no credit history, or your credit score is not where it should be, there are steps you can take to improve your credit and make yourself more attractive and less risky in the eyes of lenders. These include:
- Always make at least the minimum payment on your debts
- Make payments on time
- Keep your balances low
- Use a variety of credit types (such as loans, credits cards and lines of credit) but stay within your limits
- Limit the number of times you apply for new credit
- Consolidate debt to lower interest rates (ask us how!)
- Seek credit counselling for advice
In addition, you’ll want to check your credit report regularly to ensure the information contained within it is accurate. You can request a copy at any time from Canada’s two credit-reporting agencies, Equifax and TransUnion. Any errors in your report could unfairly affect your score and, as a result, your ability to obtain a mortgage, so it’s important to ensure it’s up to date and correct.
Where can I get help to fix my credit?
At Approved Equity, we’ll gladly review your credit situation and offer suggestions to help increase your credit score. Every step takes time, however, so it’s important to be patient with the process. Your score will increase by following our advice.
Credit counselling does work in extreme cases where you can’t fix your credit by following the tips above. But it’s important to do your research and ensure you’re working with a legitimate credit repair service. Have questions about repairing your credit or regarding your mortgage in general? Answers are a call or email away