Having a strong credit rating is crucial when filing for a mortgage in Canada. Lenders use a borrower’s credit score to calculate a mortgage’s interest rate and conditions. A credit score is a number that represents a borrower’s creditworthiness. Don’t worry if your credit score isn’t perfect; there are measures you can take to raise it. What you need to know is as follows:
Understanding Credit Scores in Canada
In Canada, credit scores range from 300 to 900, with higher scores indicating better creditworthiness. Credit scores are calculated based on factors such as payment history, credit utilization, length of credit history, and types of credit used. There are two main credit bureaus in Canada: Equifax and TransUnion. These credit bureaus collect and report credit information to lenders.
Tips for Improving Credit Scores in Canada
Improving your credit score can take time, but it’s worth the effort to qualify for better mortgage rates and terms. Here are some tips for improving your credit score in Canada:
- Pay your bills on time: Pay bills 5-7 business days prior to due date to allow your bank and creditor time to process your payment.
- Keep credit card balances low: High credit card balances can hurt your credit score. Try to keep your credit card balances below 30% of your credit limit.
- Check your credit report regularly: Review your credit report for errors or inaccuracies that may be hurting your credit score. You can request a free copy of your credit report from both Equifax and TransUnion once a year in Canada.
- Reduce the number of credit inquiries: Applying for too many credit products can hurt your credit score. Try to limit the number of credit inquiries you make.
- Use a mix of credit products: Having a mix of credit products, such as credit cards, loans, and lines of credit, can improve your credit score over time.
The Impact of Credit Scores on Mortgage Rates in Canada
Your credit score can impact the interest rate and terms of your mortgage in Canada. A higher credit score can result in a lower interest rate, which can save you thousands of dollars over the life of your mortgage. On the other hand, a lower credit score may result in a higher interest rate or the need for a larger down payment. It’s important to understand the impact of your credit score on your mortgage options in Canada.
Improving your credit score takes time and effort, but it’s worth it to qualify for better mortgage rates and terms. By following these tips and working with a Canadian mortgage broker, you can improve your credit score and achieve your homeownership goals.
Working with a Canadian Mortgage Broker
If you have a less-than-perfect credit score, working with a Canadian mortgage broker can be a great option. A mortgage broker can help you understand the impact of your credit score on your mortgage options, provide advice on improving your credit score, and find the right mortgage solution for your unique situation. I specialize in assisting my customers improve their credit score and quality for better financing options. You can contact me to talk about your options.