tips for homebuyers to improve credit ratingIt’s no secret that you need to have a decent credit rating to qualify for a mortgage whether you are getting ready to purchase a property or refinance one that you already own. There are no quick fixes or magic formulas that can improve your credit score quickly, this is something that happens over time as you demonstrate your ability to make your payments on time and use credit wisely.

People with higher credit scores and credit ratings are more likely to be offered lower interest rates, better terms, and enjoy a lower cost of borrowing over the long term.

Here are 5 steps to put you on the path for improving your credit rating:

  1. Get a copy of your credit report
    It’s hard to fix what you don’t know is wrong. Obtaining a copy of your credit report will show you what outstanding debts you have and who needs to be paid. In Canada, there are two credit bureaus Equifax and TransUnion. It’s best to request reports from both as not every creditor reports to both bureaus. You can request your report by mail or pay a fee for instant online access. If you notice an error on either report, notify the credit bureau right away.
  2. Make all future payments on time
    If you’ve missed payments in the past, or have a habit of missing payment due dates, it’s time to step up and make a plan to pay on time. Create a list of your monthly bills and mark them on a calendar, or set a digital reminder to pay specific bills at specific times. Paying your bills on time shows creditors that you can handle making regular payments on time and that your finances are in order.
  3. Pay down credit card debt
    The more you owe on your credit cards the higher your monthly payments will be. The higher your monthly payments on credit cards are the less capacity you have to assume additional payments. Something that surprises many people is that the closer you are to your credit limits, the lower your credit rating will be. Once you exceed 60% of your available credit, your credit rating will be negatively impacted
  4. Build credit with a variety of credit opportunities over time
    Credit cards are just one of many ways that a person can build their credit rating. Most utility and service providers also report to credit bureaus. If you are offered a line of credit through your financial institution, this is another way to build credit. Taking out and paying off loans is also a way to improve your credit rating. Not all of these options are appropriate to use at the same time for everyone. For example, as a young adult you may have a credit card, then perhaps you took out a line of credit for post-secondary school. Next, it’s time to replace your vehicle, so you take out a car loan. As you use and manage these financial vehicles you build your credit rating.
  5. Avoid credit inquiries in the months leading up to your mortgage approval
    When lenders view a series of credit inquiries it can raise red flags. It can show that you may be trying to live beyond your means, be in need of additional money leading up to the purchase or refinance.

Whether you are purchasing your first home, second home, vacation home, or investment property it is important to get expert advice from a trusted professional. A mortgage broker or financial services advisor can help you understand your credit report and set up a plan to improve your credit rating and credit score over time.

If you’re ready to invest in a home, condo, or property in the Columbia Valley, we’re here to help! Contact Century 21 Rockies Realty to get started today!

Posted by Scott Sauermann on
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