Repairing your credit can be challenging, but it’s not impossible. It’s easy to make financial mistakes while young, footloose and fancy-free. And, unfortunately, life’s unfortunate surprises like car accidents and illness tend to happen when you’re least expecting them. If you’re finding yourself in a difficult financial situation and there doesn’t seem to be a light at the end of the tunnel, seek out the assistance of a mortgage broker who is well-versed in a variety of financial options and services. You can make choices that will improve your credit while also save money on interest and payments.
Smart Credit Advice
Get started repairing your credit score right now with the guidance of a Calgary mortgage broker like Mortgages By Candice. Begin by asking a few basic questions. Lenders look for a credit record that shows good judgment and reflects stability — in addition to the ability to repay a loan.
- Check your credit regularly. 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.
- 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. Also, keep old cards active even if you are not using them. A longer credit history usually helps improve scores.
- 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.
Understanding Your Score
When applying for a loan – whether or not you’re in Calgary or Cairo – 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. Reporting agencies such as TransUnion and Equifax in Canada provide a score recognized across the country to help lenders make their decisions.
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 will vary between reporting agencies, so consumers should always 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.
When applying for a mortgage a lender will usually also calculate your Gross Debt Service Ratio and your Total Debt Service Ratio. You goal should be to have a GDS under 35 per cent and a TDS under 42 per cent.
If you don’t fit in to the average mortgage mold, there are many Specialty Mortgages available and a mortgages broker is your best bet for the ability to tailor your mortgage to specifically meet your needs – whether you have bad credit or not!
Calgary Debt Consolidation
If your debts have gotten too complicated – and too excessive – to realistically handle, debt consolidation might be the right solution for you. Debt consolidation is essentially combining multiple debts into your mortgage so you can reduce the overall total of your monthly payments. Improve your credit score by consolidating debt and consistently making payments on time. A mortgage broker like Calgary’s Mortgages By Candice will also make sure you save over the long term. Your goal should be to enter an agreement that pays off your total debt at a lower interest rate plus allows for prepayments and an amortization that makes sense.
Consider a Home Equity Loan
Another way to repair your credit is with a home equity loan. Put the value of your home to good use by acquiring a lower interest rate to pay off your debt. With a home equity loan you can refinance for a mortgage larger than your current amount, and opt to repay the extra balance over a fixed term or obtain a line of credit with a limit much like a credit card. The rates on home equity loans are usually lower than credit cards, so they can be another excellent way to repair debt.
There is no magic to repairing your credit, but why take chances by trying to do it all on your own? The best way to improve your score is to get the advice of an experienced mortgage broker. Unlike a bank, which will only offer the products they have available, a broker will look at the big picture of your financial situation and advise you on the best ways to save money and improve your credit score at the same time.