Grow Your Wealth: Purchasing a Second PropertyJanuary 5, 2021
We often refer to Credit Score as one of the four pillars required to obtain successful mortgage approval. The majority of existing and future homeowners do not pay attention until it is too late, and not understanding its importance often is the difference in qualifying for your next mortgage at the best rate.
Whether you qualify for a mortgage through a bank, credit union or one of our monoline lenders, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down.
Canadian financial institutions and mortgage lenders will thoroughly review one or both reports available from Equifax Canada or Transunion Canada. For this reason we recommend to our clients that they monitor their Score on a regular basis. Both of these agencies offer paid programs that will provide you with a detailed report monthly. Another great option is a free report through Borrowell.ca By monitoring your Score and history you are now able to identify any unauthorized inquiries which could negatively impact your Credit Score.
Knowledge is powerful - early detection and alerts will give you time to make corrections and ensure you have the best opportunity to obtain the best mortgage plan.
WHAT IF I DON’T MEET THE MINIMUM CREDIT SCORE?
If your credit score is accurate, but still does not meet the minimum score required by most lenders, you will want to review your Utilization Ratio which is the factor of outstanding balance to your credit limit. The rule of thumb is is keep the Utilization Ratio below 60%
Home ownership is probably the largest investment you will make. There are a number of things you can do to improve your credit score as well as your future financial success, including:
Paying your bills in full and on time.
Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible. Pay the ones with the smallest amount owing first and work your way towards the larger amounts.
Stay within the limit on your credit cards and where possible follow our Utilization Ratio rule of 60%
Reduce the number of credit card or loan applications you submit.
To discuss your unique situation please contact us