BUILD & IMPROVE CREDIT
Your credit score and how you manage credit are huge factors in qualifying for a mortgage. Here are a few things you can do to improve your credit score.
Keep reasonable balances on revolving credit
The more credit you use compared to the limit you have, the less creditworthy you appear. We recommend keeping all balances under 50% of your available limit. Paying down your credit cards every month and carrying a zero or close to zero balance will improve your score.
Make all your payments on time
Good credit is established and maintained by making payments on time. Any missed payments will be reported by the credit holder or lender to the credit reporting agencies (Equifax and Transunion) which will cause your score to drop. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the outstanding debt will most likely be sent to a collection agency. Collections will remain on your report for a long time. *Note credit card companies and lenders only report late payments after 30 days of not receiving the payment. If you have missed a payment, ensure to pay it promptly.
Use your credit cards
If you have acquired credit cards to help build your score, you want to make sure you are using them at least once every 3 months. Many people find success in having a pre-authorized payment set to come off the card and paying the balance each month.
Check your credit report regularly
Good credit is established and maintained by making payments on time. Any missed payments will be reported by the credit holder or lender to the credit reporting agencies (Equifax and Transunion) which will cause your score to drop. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the outstanding debt will most likely be sent to a collection agency. Collections will remain on your report for a long time. *Note credit card companies and lenders only report late payments after 30 days of not receiving the payment. If you have missed a payment, ensure to pay it promptly.
Other tips and tricks
DO NOT APPY FOR CREDIT TOO OFTEN - too many credit inquiries in a short time period could affect your score.
DON'T CLOSE UNUSED CARDS - especially the cards that have a long reporting history.
BE AWARE THAT PAYING OFF A COLLECTION ITEM DOESN'T REMOVE IT FROM YOUR CREDIT REPORT - It will stay on the report for 7 years, but will show as paid. Ensure to handle collections immediately.
RULE OF THUMB IS TO HAVE 2 TRADE LINES REPORTING - trade lines are credit cards, loans and lines of credit. Lenders like to see a minimum limit of $2500, reporting for a minimum of 2 years.
SET UP A PLAN TO MANAGE YOUR DEBT - if you are having trouble making ends meet, contact your creditors or seek help from a credit counsellor.
You may benefit from a full credit review to ensure you are on the right track. We can come up with a tailored plan for you to ensure you are in the best position to make a purchase.
