Give Yourself Some Credit Credit Scores And Mortgages

Early in 2015, the Credit Bureau made some changes to its credit reporting software that provides lenders with not only your overall credit score, but also your spending habits. Understanding what these changes are and how they affect your ability to borrow are critical if you are interested in securing self-employed mortgages in Edmonton.

The Relationship Between Credit Scores & Mortgages

Lenders use the information in your credit report to determine the amount of risk you represent when borrowing money. Overall credit scores range from 300 to 900 and each level below 900 tells your potential lender the likelihood of you defaulting on your payments, so only a handful of points can significantly impact your ability to secure a mortgage.

While each lending institution has its own criteria for granting mortgages, it is accurate to say that the lower your credit score, the greater risk you represent so you will have higher interest on your mortgage, if you secure one.

New System, New Story

Your credit report now tells a more detailed story about how you handle your credit and whether you live within your means, or are prone to live off of your credit. Here are the three new scores added to your credit report:

  • The first score is a ratio of the amount of available credit compared to the amount you have used. If you have several credit cards or a line of credit with reasonable or low balances, your score will be much higher than if you have maxed out all available credit.
  • This score gives you a rank based on the number of late payments and collections activity you have had on amounts of $250 or more. Delinquent amounts over 90 days will drastically reduce your score and affect your ability to secure mortgages in Edmonton.
  • The third score indicates any third party collection action against you and considers the oldest delinquent credit accounts. Since this section goes back three years, many people are surprised by old unpaid moneys that appear in this section, such as parking tickets, old cell phone contracts or gym memberships that were unfulfilled.

Bumping Up Your Credit Score

There are a few simple rules to follow to improve your credit scores so you can qualify for the best terms on mortgages in Edmonton:

  • Develop a history with at least two accounts with credit of $2,000 available. Credit cards or a combination of a credit card and line of credit are good examples.
  • Keep the balances on these accounts under 65-percent of the total credit available on each.
  • Make your payments a few days before the due date so you are never late.
  • Do not ignore seemingly small items such as parking tickets and never let anything go to collections.
  • Although you should review your credit report annually, also review it several months before you apply to make a large purchase such as a home.

Getting mortgages in Edmonton can be a stressful process, but it doesn’t have to be that way. At Dominion Lending Centres, our expert mortgage brokers have the knowledge to answer all of your questions and make the process as painless as possible. Contact us today to find out how we can help you secure a mortgage.

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