If you want to get a mortgage, you want to present yourself in the best possible light in order for a lender to see you as a well-qualified buyer and give you the best mortgage rate available
. Even if your income level is high, there can still be one thing that’s screwing you over: your credit. Here are the easiest ways to improve your credit rating before you get a
- Review your credit report. You can get it for free from the two credit reporting agencies, Transunion and Equifax. You don’t want to apply for a mortgage, only to get declined because of an error on your credit report. If you spot any errors, you can then contact the agencies to rectify them. Getting any erroneous information removed from your report can instantly boost your credit score, and doing it before you get a mortgage pre-approval could make that process a quick one.
- Make all of your bill payments on time, even if you can only pay the minimum balance. The single biggest factor in your credit score is payment history, the record of you paying down your debts. If you’re falling behind on an account, contact the creditor and work out a payment plan. Don’t stick your head in the sand and ignore the payment date, even if you think that you will be able to make it up in the next month. Once your payment is late, you can be reported, and that information will remain on your credit report for years to come.
- Establish credit, especially if you’re new to Canada or are just starting out on your own and becoming financially independent. You might think that your record looks better if you don’t have any debt at all, but lenders like to see a record of good credit, and that means having a record of on-time payments and accounts that haven’t been maximized. Being able to obtain and use credit is proof that you’re responsible with money, and, therefore, that you’re going to be responsible with the lender’s money. Getting a credit card is an easy option, as long as you use it minimally and pay off the balance every month. Even things such as paying for your cell phone or internet regularly may count as positive credit.
- Refrain from closing any old credit card accounts, even if you don’t use them. You want to keep all of your credit lines open to show that you aren’t needing all of your available credit in order to finance your day-to-day expenses.
- Don’t apply for a lot of credit at once. If you need to get a credit card or a small loan in order to establish credit, that’s fine. But opening multiple lines of credit – say, if you apply for multiple credit cards at the same time as you get a personal loan from the bank – then that raises a red flag as a potential sign to creditors that you need credit to make ends meet on a day-to-day basis.
Apart from correcting errors, any changes that you make to improve your credit are going to take time before they’re reflected in your credit score. Begin periodic credit checks up to a year before you want to buy a home, and you won’t encounter any nasty surprises when you apply for your mortgage. Doing this can help you get the best mortgage interest rate
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