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Improving Your Credit

Improving Your Credit Score

The Top 3 factors in qualifying for a mortgage are

  • Employment Stability
  • Down payment/equity
  • Credit Score

You can argue that your credit score is the most imporant. Why?

If you want the best interest rates available on the market, the higher your credit score the better.

If yu have had credit issues in the past, don’t be disheartened. You are able to improve your credit score, and you can start now.

Everyone has a credit score, and mo matter where it is on the scale of 300-900, there is always room for improvement.

Here are some things to consider that will help boost your credit score.

Make all your payments on time. This is extremely important. Probably the most important factor. When any lender extends credit to you, you agree to make payments on a schedule. When you break that schedule, you show the lender you can’t be trusted. The lender reports the missed payments to the credit reporting agencies, and your credit score score and rating takes a hit. It’s that simple.

You miss a payment, now what? The second you realize it, or have the money, make the payment. It’s also a good idea to contact the lender, let them know what happened and tell them that the payment has been made. Although lenders only report after payments have been missed for 30 days, don’t let that stop you from making all your payments on time.

Stop acquiring new credit. Assuming you have at least 2 different trade lines with a minimum $2500 balance each, you shouldn’t just go out and acquire new credit. Now, if you need a car loan, that’s fine, make an application, but having more credit available to you just for the sake of it doesn’t help your credit score. In fact, each time a lender looks at your credit report, it will lower your credit score a little bit.

Now, if you are being pre-approved for a credit limit increase, or a new credit card, or a line of credit, the lender is quite likely not going to do a credit check on you. Clarify with them whether they are, and how this will impact your credit rating. If you have any doubts or concerns, contact us and we can help you with your specific situation.

Keep a reasonable balance. The more credit you use compared to the limit, the less credit worthy you will appear. So it is a lot better to carry a minimal balance compared to maxing out your credit cards, and just making the minimum payments. It’s a good idea to keep your spending to 20%-30% of the limit of the card or line of credit. That shows good utilization.

Periodically check your credit report . About 20% of credit reports have misinformation on them!

Mistakes happen all the time, lenders misreport information, people with the same names get their profiles confused, you miss a final bill from a utility and it gets sent to collection without you knowing.

By checking your credit periodically, you can stay on top of everything and correct any errors before they become a problem.

Equifax Canada has a great program. As does Transunion.

Pay out collections immediately. Items being sent to collections happens more than you would think. Closed cell phone contracts with a small balance owing, or a utility final billing that got missed, parking tickets, or wage garnishments, or spousal support payments. They can all show up on your credit bureau, and they won’t drop off until they are handled.

If you have any of these on your credit report, you should consider taking care of them as soon as possible. Then make sure to follow up, and ensure they have been removed.

Use your credit card. This may sound obvious, but there are a lot of people out there who do not realize this. You want to make sure that you use your credit at least every three months.

Loan payments are great in that they come out of your account on a regular schedule,

If you only have credit cards, and never use them, there is a chance the lender might not report to the credit bureau at all, and that won’t help your credit score in the least. A simple way to go is to use a credit card for gas and groceries, and pay it off every month.

No matter what your credit looks like now, if you follow the points outlined above, you will continue to increase your credit score.

If you would like to work through your credit report with me, and put together a plan so you can qualify for a mortgage, please don’t hesitate to contact me anytime!

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