Is Your Credit Score Striking Out Or Knocking It Out Of The Park?
Why A Good Credit Score Matters
If you’re considering buying a home and looking to secure a mortgage, it’s imperative that you maintain a healthy credit score. Having a good credit rating goes a long way in terms of your ability to borrow. It tells a lender a great deal about your credit history and ultimately the status of your financial health. Essentially, lenders use the score to assess the risk you present as a potential borrower – which significantly impacts if and how much lenders are willing to let you borrow.
Who Determines Your Credit Score?
Two reporting agencies, Equifax and Transunion, determine your credit score using a scale from 300 to 900. Higher scores on this scale indicate a healthy credit rating and lower scores on the scale indicate more risk for the lender.
How To Improve Your Credit Score
The best way to correct or to improve your credit rating is to adapt sound credit practices over an extended period of time. Be responsible and aware; review your credit report annually; spend within your means; pay your bills on time, and do not hesitate to get help if your borrowing habits have gotten out of control.
1) Know Your Credit History
Think of it as checking up on your health, your financial health. You can easily obtain your up-to-date credit report via the two credit reporting agencies – Equifax and TransUnion. When you receive your credit report you should check for errors or possible identity theft and/or fraud. Errors on your credit report can negatively impact your credit score and your ability to borrow.
2) Pay Your Bills On Time
Your payment history is an important element of your credit score. Late payments to your loans and credit cards can and will lower your credit score. As a result, ensure you pay at least the minimum amount owing on time. In essence, keep up with payments to all bills not just loans and credit cards. Not only will it help you develop the right habit but it will ensure you credit score either remains good or improves.
3) Keep Your Balances Low
Even though you may have a $10,000 credit limit, it doesn’t mean it is a good idea to use it all. In fact the Financial Consumer Agency of Canada (FCAC) recommends consumers should keep a balance between 35-50% maximum of their credit limit. The closer you are to your maximum limit, the lower your credit score will go.
It may seem as though it is better to stay away from all credit and loans in order to avoid a low credit score; however, the contrary is true. If you have no credit history at all, it will result in a low credit score because you have no record of paying any credit back. In essence, your ability to borrow and pay back cannot be measured. Therefore it is a good idea to obtain some sort of credit even a secured visa or low-limit credit card to build some credit history.
4) Seek Professional Advice
Need help in getting your finances on the right track? Mortgage professionals can provide you with tips and strategies on improving your credit score and show you how to work your way toward mortgage qualifications.
They can help you:
• Eliminate debts
• Rebuild and increase credit ratings
• Find financing alternatives
• Improve your cash flow management
• Provide the financial knowledge that allows you to make informed and effective decisions.
Consult, Search, Buy…
Buying a home is one of the most important financial decisions you’ll make in your lifetime. When you work with us, we guide you through the entire home buying process and act as your advisor, consultant and negotiator every step of the way. Why go it alone?
