For most Canadians, buying a house is one of the most important investments made in a lifetime. Buying a house essentially requires two things – having a down payment and getting a good mortgage which ultimately requires a good credit score. A good mortgage means getting the lowest interest rate on your loan. The rate of interest for each individual depends primarily on their credit score. This requires a healthy financial profile which could take a few years to build up and a lot of conscious effort.
The credit score is a measure of the risk a creditor is willing to take based on the details of the financial profile – especially viewing the repayment history, that is, how prompt and regular one is with paying their credit cards, car loan and other bills. A good credit score will determine the rate of interest on the mortgage loan. It also helps to get instant approval on other loans. The higher your credit rating, the lower will be your interest rates. A good credit score will ensure lower interest rates and a better mortgage rate too!
The perfect applicant is someone who is able to pay their bills on time, each and every time; maintains the credit card usage balance within 30% of the available credit limit and someone who applies for credit only when needed.
Here are a few pointers to improve your credit rating if you are looking to get a mortgage in the near future:
- Review your credit score periodically
- If you notice anything unusual, report it to the credit agency or your creditor in order to correct it
- Apply for a new credit only if and when required
- Only utilize 30%-35% of the available credit
- Pay all bills on time, every time. One late payment can affect your score
- Most importantly, do not close your accounts, even if you are not using them, they contribute to a better credit score
A good credit rating will always help to secure a good mortgage rate. If you find yourself stuck with high interest credit card and loan payments, you may consider a debt consolidation mortgage. Debt consolidation is a very handy technique to reduce multiple high interest loan payments into one lower consolidated payment.
A licensed mortgage broker can help your financial situation and suggest ways to improve credit if needed. There are options for every circumstance. Don’t be afraid to discuss your situation today.
