Your credit score will play a major role in your ability to secure a good mortgage loan. So what is a credit score? In the eyes of a credit bureau, it’s a number between 300 and 900 that represents your ability to pay bills and debts on time. If it is too low, you may be unable to acquire a mortgage loan or can only obtain loans with high-interest rates.
Not sure what constitutes a good score or what score you need for a mortgage loan? Need tips on how to increase your credit score within a few months? We have all this information and more below to help you acquire an excellent loan for your new home.
Assessing Your Credit Score
Before you attempt to acquire a mortgage loan, you should first access your credit score. You can typically view your score by locating your latest credit report on your banking app. Otherwise, you can request a credit report from Equifax or TransUnion, Canada’s two primary credit bureaus.
Now that you have your score, you may be wondering, is it good? Or is it low? A good score, according to Equifax, is any score between 660 and 724. Scores between 724 and 900 range between very good and excellent. Your credit score isn’t really considered low unless it’s under 600.
Can You Acquire a Mortgage Loan?
So, do you have a high enough score for a mortgage loan? Most likely, yes. You can typically acquire a mortgage loan with a score of at least 600. So, the real question is, can you receive a good mortgage loan.
If you want to successfully apply for mortgage loans with competitive interest rates, you’ll need a score of at least 680. The higher your score, the better interest rates you’ll have access to. The lower your score is, the fewer and less appealing options you’ll have. The good news is that you can increase your score significantly over just a few months.
How to Increase Your Credit Score
To raise your credit score, you’ll need to find ways of proving your fiscal responsibility. For your convenience, here are a few effective methods for increasing your score.
No More Late Payments
For the next few months, all of your payments on your debts and bills need to be on time. It would be best if you used this time to pay off any past-due bills you might have.
Limit Your Credit Card Usage
Making large purchases on your credit card can negatively affect your credit score, even if you quickly pay it back. Ideally, you should try to restrict your credit usage to approximately 30% or below your available credit.
Increase Your Credit Limit
If the previous recommendation doesn’t sound attainable for you, you can request an increased credit limit. A higher credit limit will improve your credit utilization ratio, as described above, without you having to spend less. That said, make sure you’re not using your credit card for unnecessary purchases that only make it more difficult to pay down your debts.
Don’t Add New Debts
Your focus should be on paying down your current debts, not acquiring new ones. Attempting to open multiple new accounts can trigger a credit inquiry, which can negatively influence your credit score.
Now that you Raised Your Credit Score — What is NEXT?
Now that you know how to increase your credit score, you’re more equipped to secure a great mortgage loan in the near future. Once you feel you’re financially prepared to purchase a home, your next step is to find the best Collingwood real estate agent to help sell your house. With their negotiating skills, experience, and market knowledge, they can find you a home that meets your wants, needs, and budget.