A good credit report and credit score are important factors in determining whether you will be approved for a mortgage. Following are some simple steps you can take to maintain a good credit history and improve your chances of being approved.
What is a credit score?
Your credit score is a number that illustrates your financial health at a specific point in time. It also serves as an indicator of your financial past, and how consistently you pay off your bills and debts. This is one of the factors mortgage professionals consider in qualifying you for a mortgage.
Checking your credit score
To find out your credit score, contact Canada’s two credit-reporting agencies: Equifax Canada at www.equifax.ca and TransUnion Canada at www.transunion.ca.
For a fee, these agencies will provide you with an online copy of your credit score as well as a credit report – a detailed summary of your credit history, employment history and personal financial information on file. You can also obtain a free copy of your credit report by mail every year. If you find any errors in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy immediately.
It’s important to begin building a credit history as early as possible. You can start by applying for – and responsibly using – a credit card. Your financial institution or mortgage professional can help.
Boosting your credit
Demonstrating your ability to manage credit is key to maintaining a good credit score. There are a number of things you can do to improve your credit score, including:
- Always pay your bills in full and on time. If you can’t pay the full amount, try to pay at least the required minimum shown on your monthly statement
- Pay off your debts (such as loans, credit cards, lines of credit, etc) as quickly as possible
- Never go over the limit on your credit cards, and try to keep your balances well below the limits
- Reduce the number of credit card or loan applications you make
Once your credit score has improved, work with your mortgage professional to obtain a mortgage that works for you.
To find out more about credit scores and reports, visit the Financial Consumer Agency of Canada website at www.fcac-acfc.gc.ca and download or request a free copy of their guide, Understanding Your Credit Report and Credit Score. This guide provides practical, straightforward information on how to obtain and understand your credit report and score, as well as how to build and maintain a good credit history.