Pull Your Credit Score. When applying for a loan your credit score is one of the factors lenders use when determining your potential interest rate. Lenders look at how you have managed your credit in the past to predict your future actions. A credit record that shows good judgment and reflects stability – in addition to the ability to repay a loan – is what they want to see.
If you are planning to apply for a mortgage or make a large purchase, check your credit score about three months in advance. This will give you time to make sure your report does not have errors and possibly take steps toward repairing your credit score before beginning the pre-approval process. You can check your credit rating on your own using resources such as Equifax and TransUnion Canada. There is a cost, so ensure you keep track of the report you are provided.
Scores are between 300 and 850 and reflect how much you owe, how long you have had credit, your payment record, the types of credit you have, and how often you have applied for new credit. Scores may vary between reporting agencies, so consumers should check both. Consumers with higher scores are perceived as being a lower risk for a lender. To qualify for the lowest interest rate on a prime loan, you should have a score over 680.
If you have not scored as well as you would like, you there are many methods of improving your credit before going through the mortgage pre-approval process.
- Establish a long credit history. Some consumers have low credit scores simply because they have never used credit before. Begin by getting a basic credit card and make small purchases, and then pay off the entire balance each month.
- Make your payments on time. Late payments reduce your score. This applies primarily to credit cards and loans, but some cell phone companies also report late payments.
- Keep credit card balances low. You improve your credit score by staying under 75 per cent of your limit. It is actually better to have a lower balance on several credit cards than a higher balance on one.
- Only apply for credit you need. A store credit card might sound like a good way to get a discount, but applying for multiple cards over a short period of time can make you appear irresponsible or overextended.
Most people are also not aware that each time a separate lender requests your credit information your credit score can be negatively impacted. By using a mortgage broker your credit will only be checked once. Mortgages By Candice’s multiple lending partners then enable you to access the best possible terms, prepayment privileges and interest rates in today’s marketplace — something single lenders cannot provide.