Our Ottawa mortgage broker team knows how important good credit is when applying for a mortgage loan. After all, your credit score plays a big role in how much you qualify for, the interest rate you get, and PMI payments. This is why we advise our clients to clean up their credit several months before applying for a mortgage. Here are some tips to help you get started on raising your credit score.

Canada’s Credit Score System

Credit scores in Canada range from 300 to 900 and are rated in groups:

  • Scores between 300 and 599 are rated as Poor Credit
  • Scores between 600 and 649 are rated as Fair Credit
  • Scores between 650 and 719 are rated as Good Credit
  • Scores between 720 and 799 are rated as Very Good Credit
  • Scores between 800 and 900 are rated as Excellent Credit

Review Your Credit Report

Whether you are applying for a loan or not, it’s a good idea to become familiar with your credit report. Mistakes can sometimes be made that bring your credit score down, such as debts that were paid off but not removed. There is also the chance that your details have been compromised, which can result in debts that aren’t yours to be added to your credit report. By disputing these errors, you can raise your credit score quite a bit. If you find errors, contact Canada’s credit bureau (Equifax and Transunion) to dispute it and have it removed.

Making Payments On Time

Late and missed payments can really damage your credit score. 35% of your score is based on how often you make your monthly repayments on time. By doing so, lenders see you as less of a credit risk than a person who misses payments or pays them late on a regular basis.

Pay Down Debts 

Getting other debts paid down, especially credit with high-interest rates, can make a big difference in your credit score. When formulating your credit score, a credit utilization ratio is used to see just how much of a credit risk you are. Lenders will look at how much of your available credit you are using. The ideal percentage you should be using is 30% or less. When lenders see credit cards that are consistently maxed out and you only make the minimum monthly repayments, it can be a red flag that you are a credit risk.

Have a Good Credit Mix

Lenders also like to see a credit report that has a good mix of credit types, which includes revolving credit, credit cards, and personal loans. When you have too few lines of credit, it can make your credit score lower than if you had a good mix of credit lines. Lenders like to see how well you handle different credit types.  As mentioned above, make sure that you pay off all of your credit lines on time every month to keep your credit score looking healthy.

If you want to see what mortgage options are available to you, or have questions about raising your credit score, give our Ottawa mortgage broker team a call today!