For most people, buying a home requires securing financing through a lender. This process can be incredibly comprehensive and usually requires you to submit multiple forms of documentation to prove to the financial institution providing your mortgage that you can repay the terms of the loan. Your credit score plays a large role in whether your application is approved or denied, so if you have less-than-stellar credit, here are some tips for bringing up your score:
- Meticulously review your credit history and current score. You are entitled to a free credit report from each of the credit bureaus – TransUnion Canada and Equifax Canada. Obtain copies of each report and look for incorrect information on them that could negatively impact your credit score, like incorrectly reported late payments or accounts that do not belong to you. You should dispute this incorrect or incomplete information to further improve your credit.
- Pay down your debts over time. Try to eliminate your debts completely or at the very least, pay down how much you owe. Lenders consider your debt-to-income ratio when assessing your eligibility for a mortgage, and the lower your ratio, the more likely it is you will qualify for a loan.
- Use available credit with care. If you plan to use credit to manage your expenses, do so carefully. Unless absolutely necessary, do not open any new accounts, keep a low balance on any existing credit cards, and pay off debt instead of moving it around to different accounts.
- Turn to a professional. If you still struggle to pay off your debts and improve your credit, consider seeking the assistance of a credit counselor.
While improving your credit can take time, following these guidelines and remaining diligent about increasing your score by paying your bills on time, reducing debt, and using credit wisely can result in a better credit score faster than you may have thought.