How to Improve Your Credit Score Before You Purchase Your Home
Are you looking to buy a house but your credit score needs help? First check your personal credit history report. It is always useful to look at your credit report to make sure what is detailed in your report is accurate information about you. Consumer reports have noted that 80% of credit reports have some sort of errors.
Two companies in Canada are responsible for supplying credit reports:
- Equifax
- TransUnion Canada
You can contact them directly to get a printout of your personal credit report.
Financial institutions use their own creditworthiness formulae. So if you are looking to buy a house, your credit score comes into play to assess your own personal risk to a financial institution. So what credit scores do lenders typically need? If your credit score is above 680, you are considered low risk but if you are below 600 on your score, you usually need to get your credit score bumped up.
If you pay everything in cash, you will not have a credit history. Financial institutions want to see that you can make payments usually on at least two debt payments over a year or two (e.g. credit card, line or credit or personal loan). Start off by getting a credit card and use it for small debt that can be paid in full monthly.
If you have had a lot of debt and your score is not the ultimate, you can start by trying the following:
- Make debt payments on time
- If you can’t pay a bill in full, make sure you make the minimum payment
- Be wary of companies that say they can instantly improve your credit score
- Don’t go over your credit card limit – keep balances low and pay monthly
- Make sure you pay off any collection accounts asap
A good mortgage broker can be of tremendous help to see if you qualify for a mortgage. With access to financial information, various financial lenders and knowledge on how to qualify for a mortgage, brokers can discern if you are eligible for a mortgage. They work for you to find the best mortgage with no cost to you. The broker’s cost is received from the lending institution who will hold your mortgage.
When you go to a bank, they may turn you down directly but with a broker they have an inventory of many lenders to pick from to help you qualify. Lenders’ financial criteria vary depending on the institution. So whether you have no credit history or a rather negative credit score, you can over time make adjustments so that your credit score will improve so you can buy your home.
The Winch Walton Team have a team of professionals including mortgage brokers that are available to help you with your financing questions. The Winch Walton Team can also help you with all your real estate needs by providing free home staging, or help with buying or selling your home.