Don't Let Your Credit Score Crush Your Mortgage Dreams: Tips for Improving Your Credit Score in Canada
So, you’ve decided it’s time to buy your dream home. You’ve saved up for a down payment, found the perfect location, and picked out the perfect shade of paint for the living room walls. But wait, there’s a problem: your credit score isn’t quite up to snuff. Don’t let a mediocre credit score crush your mortgage dreams. In this blog post, we’ll go over some tips for improving your credit score and increasing your chances of getting approved for a mortgage in Canada.
Tip #1: Pay Your Bills On Time
One of the most important factors that influences your credit score is your payment history. Late payments can stay on your credit report for up to seven years and can have a significant impact on your credit score. If you have a habit of paying bills late, it’s time to break that habit. Set up automatic payments or reminders on your phone to make sure you pay your bills on time every month.
Tip #2: Keep Your Credit Utilization Low
Your credit utilization ratio is the amount of credit you’re using compared to the amount of credit available to you. Lenders like to see a credit utilization ratio of 30% or less. If you have a high credit utilization ratio, it can be a red flag for lenders and can lower your credit score. To keep your credit utilization low, try to pay off your credit card balances in full each month and avoid using more than 30% of your available credit.
Tip #3: Don’t Close Old Credit Cards
Closing old credit cards can actually hurt your credit score. When you close a credit card, it reduces the amount of credit available to you, which can increase your credit utilization ratio. It also shortens your credit history, which can have a negative impact on your credit score. Instead of closing old credit cards, keep them open and use them occasionally to keep them active.
Tip #4: Check Your Credit Report Regularly
Your credit report is a snapshot of your credit history and is used by lenders to determine your creditworthiness. It’s important to check your credit report regularly to make sure there are no errors or fraudulent accounts that could be dragging down your credit score. You can get a free copy of your credit report once a year from each of the major credit bureaus in Canada: Equifax and TransUnion.
Tip #5: Be Careful With New Credit Applications
Each time you apply for credit, it can have a negative impact on your credit score. That’s why it’s important to be careful with new credit applications, especially when you’re in the process of applying for a mortgage. Avoid applying for new credit cards or loans in the months leading up to your mortgage application.
Improving your credit score takes time and effort, but it’s worth it in the end. A good credit score can not only increase your chances of getting approved for a mortgage in Canada but can also help you get better interest rates and terms on your mortgage. If you’re ready to take the next step towards homeownership, start by checking your credit score and following these tips to improve it.