What Lenders are Looking For: Get to know your Credit Score
Posted by Brad Speniel | May 22, 2015 at 10:31 am
ESTIMATED READING TIME: 2 minutes
Your credit score is a three-digit number that lenders use to predict your credit worthiness. Credit reporting companies calculate your score based on your payment history, how much you owe, how long you’ve had credit and how often you apply for new credit. In general, the higher your score, the less likely you are to become delinquent on credit. If it’s above 650, you’ll probably qualify for a standard loan. If it’s lower, you may have trouble getting new credit.
Review your credit regularly
Because your credit score and credit report are constantly changing, it’s important to review them on a regular basis, at least once a year. Since there are two main credit reporting companies in Canada—Equifax and TransUnion—it’s a good idea to check your records with both companies. This helps you identify and correct any inaccurate information, detect any fraudulent activity and gauge your overall credit health.
How you can improve your score
If you’re planning on applying for a mortgage, it helps to know what lenders are looking
for and it’s especially important to check your report a few months in advance. If your credit score is a little low, here are some actions you can take to improve it:
• Pay all your bills on time. Paying late or going into collection can reduce your score.
• Don’t max out your credit limits. Keeping balances below 65-75% of your limit can increase your score.
• Don’t apply for credit you don’t need. Too many inquires over a short period can reduce your score.
• Don’t close old credit accounts, even if they’re inactive. This can make your credit history appear shorter which can reduce your score.
• Correct any negative inaccuracies on your credit report. This can increase your score.
Still unsure about your credit score and how it will affect your mortgage application? Talk to your mortgage broker to find out more. Not only will you better understand what credit means to lenders, your broker will shop over 50 lenders to find a mortgage solution for your exact credit situation.