Your credit history is an important piece of the puzzle used for considering your eligibility for a mortgage in Toronto or Brampton. Whenever you apply to borrow for any reason, your lender will need to know your credit score, and a mortgage is no different. Lenders want to know whether you can manage paying back any amount money. If you cannot show that you are responsible with a credit card or other line of credit, lenders may doubt whether you can manage a much larger loan.
What is a credit score?
Your credit score is a record of your debt obligations and is used to determine your creditworthiness and your ability to pay back what you borrowed. Each line of credit you use has some sort of deadline for payment, which is essential for determining your score. These repayment terms include monthly car loan payments and the minimum amount due each month on your credit card. Make your payments on time and you will retain a high credit score. This isn’t the only factor considered in the course of determining your credit score, though.
What factors determine your credit score?
Lenders often most like it when borrowers have 2 lines of credit maintained for at least a year, with an overall credit score of at least 620. These 2 lines of credit should have had R1/I1 status. R stands for revolving, which means that the credit can be used again once you have paid it off, like with a credit card. I stands for installments, which means that you are not able to access the debt once you have paid it off.
One factor that will keep your credit score high is always paying your minimum balance on time. You should also try to keep your balances at no more than 75% full of your limit. Do close any lines of credit that you are not using–an unused piece of credit won’t help you.
Which credit practices should you avoid?
Some practices that you might not consider can negatively impact your credit score. This includes co-signing with someone else. Whatever happens with a co-signed account is going to affect you–and you may not like the results. Another bad practice is to wait to pay your entire credit at once, in the meantime missing a deadline. You’d also be unwise to wait to deal with credit problems, such as identity theft or purchases that were recorded in error–get them dealt with soon so lenders can see that you are responsible.
If you need to talk to a mortgage broker in Toronto about your credit, please contact me and I’d be happy to help.
