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Credit, Credit, Credit!


You’ve finally finished school and landed a good job. Sure you maxed out your credit cards and your cell phone company closed your account because you couldn’t make payments, but you were a student! Who could blame you!

Now that you’re making good money, you’ve saved your 5% down payment, you can go and buy the house of your dreams, right?

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That may not be the case just yet…

There are quite a few people who don’t know how much credit history affects getting approved for a mortgage. Schools don’t teach you how racking up your credit cards, not paying your bills, or having no credit history affects your ability to purchase a home.

Here’s some Real Mortgage Advice when it comes to credit and buying a home.

When banks and other lenders look at your credit history, this tells them how much risk investing in your mortgage will be. Credit Beacon scores range from 0 - 900. If you are wanting a mortgage with competitive rates and only 5% down, you will need a Beacon score of at least 620. Ideally, you want to aim for the 700’s.

Someone who has never gone over limit, always makes their payments on time, and has no collections or bankruptcies on their bureau will be considered lower risk than someone who does. All of these things effect your score on your credit bureau.

Here are 5 tips to raise your credit score and get you in a good position to qualify for a mortgage.

1) Pay your bills on time.
Credit cards, loans, lines of credit, cell phone bills, utility bills, any bills that you have, make sure you pay them on time. Even if you can’t pay the full amount, making the minimum payment will help keep your accounts in good standing, however only making minimum payments won’t help either. Any late or missed payments tells the lenders that you may miss a mortgage payment.

2) Keep your revolving balances low.
Never go over your credit limit. If you’re going to carry a balance, make sure it is 50% or less than the limit. Ideally, 35% or less than your limit. If you are close to your max, this shows the lender that you’re living on the edge of your means. If you need to carry a high balance, it is better to carry a high balance on your line of credit than on your credit card.

3) Pay off any collections.
Lenders will not give lend you any money if you have outstanding collections. If possible, once paid off, see if you can get the collection taken off your bureau, otherwise it will stay on your bureau for 7 years from when it is paid off.

4) Have 2 Trade lines for at least 2 years.
Trade lines are any form of credit access, for example a credit card, line of credit, or loan. Lenders want to see 2 years of good credit history. If you don’t have any of the above it is a good idea to start with a credit card. If you don’t qualify for an unsecured credit card, some banks will give you a secured one with a deposit.

5) Check your credit bureau regularly.
It’s a good idea to see what your bureau looks like. Many people with bruised credit aren’t even away of things reporting negatively. A good way to keep track is to go to equifax.ca or transunion.ca and order a full credit report.

It takes credit to get credit.

Want more information about qualifying for a mortgage? Talk to your mortgage broker today!

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-Real Mortgage Advice