Credit Score Factors
A credit score is a numerical value that determines the likelihood that you will be able to repay those who lend you money; it represents your creditworthiness. This score is based on a credit report from credit bureaus, such as Equifax and TransUnion. Included in your credit report is your entire credit history: all credit accounts opened in your name and all of the account details (credit limit/amount, payment terms, balance, and late or missed payments).
Typically, the lower your credit score, the higher the borrowing cost because lenders will need to assume a greater risk. The best rates and terms are often given to those with credit scores of 740 or higher, but those with scores ranging from 650 to 739 can also get good deals.
In addition to your credit score, you also have to ensure that you have a good credit rating, a rating that determines your personal credit. Your credit rating is a scale from 0 (insufficient credit) to 9 (bad debt), preceded by an “I” for instalment credit (home/auto financing) or a “R” for revolving credit (credit cards).
Good credit is crucial when applying for a mortgage because lenders use this to evaluate the risk of lending you money. They will use your credit score, credit rating and credit report to determine if they are comfortable with lending you money and at what interest rate. By having good credit, it is more likely for you to acquire affordable mortgage financing.
Tips to Improve or Maintain a High Credit Score:
- Make correct loan payments on time
- Avoid overextending your credit
- Keep your outstanding debt as low as possible don’t continuously extend your credit close to your limit
- Never ignore overdue bills
- If there are any repayment problems, call your creditor to make repayment arrangements
- Limit the number of times you apply for credit
- Try to have a long, instead of short, history of good credit
Overall, it is extremely important to maintain good credit if you are applying for a mortgage. As your mortgage broker, Maple Leaf Mortgages will get you the best rates and terms possible; and if necessary, we will help you improve your credit score so that you can qualify for a lower rate. Call us for a free consultation and we will do our best to ensure that you get the mortgage that you need.
Written by Christy Lee
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