No surprise… consumer debt – including credit card debt, interest rates, and borrowing costs are at record-high levels in Canada. What may be a surprise though, is the affect your credit report and credit score can have on your borrowing costs, including mortgage financing (remember, I’m here to help with that).
Before you start looking for new or renewed mortgage financing, make sure your credit report is in good shape. Here’s how…
The Basics: Your Free Credit Report
Start by accessing your free credit report online from Equifax and TransUnion, using this secure Government of Canada link: https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/order-credit-report.html. Check both Equifax and TransUnion reports before you apply for any new financing. Some lenders only report to Equifax, some report to TransUnion, and some report to both.
Understand Your Credit Score
Your credit score is a three-digit number. In Canada, your credit score ranges from 300 to 900. A credit score between 780 – 900 is considered excellent. Your credit score impacts the interest rate offered on mortgage financing and most other forms of financing.
Five Types of Accounts that Report to Equifax and TransUnion
- credit cards
- lines of credit
- loans/leases
- mortgages
- moobile phones
Credit cards affect your score the most.
The Importance of Your Credit Card Utilization Rate and Making Payments
Your utilization rate (your balance versus your limit) is just as important as your payment history. Making the minimum payment is essential. Paying your balance every month in full will save you from paying painful double-digit interest rates. But this isn’t enough to generate a high credit score. The lower you keep the balances on a regular basis, the better. You can improve your credit by making multiple payments each month or by using cash and debit more often.
Read the ENTIRE Credit Report
Reduce the risk of fraud by reviewing your credit report in full. Fraud continues to be the number one growing crime in Canada. In 2022, the RCMP reported $530 million worth of victim losses due to fraud representing a 40% increase from the unprecedented $380 million in losses in 2021.
Many people look only at their score and completely forget about checking personal information, such as address and phone number. Potential fraudsters will start by changing your contact information. The more often you check, the safer you and your credit will be.
Talk To Your Creditors
Setting up a payment plan can help minimize damage to your credit should a collection or judgment be registered on your credit report. It may be possible to negotiate a reduced lump-sum payment with anything other than government debt. Be sure to get written confirmation that the account has been settled. It’s much easier to dispute leftover balances or errors when you have supporting documentation.
One Last Thing…
People often wonder why they should choose a Mortgage Broker (like me) over a banking institution. The short answer is: mortgage brokers work for you! Their fees are paid by the lender, not you. Mortgage brokers are certified professionals who search for the best mortgage terms by accessing a huge network of lenders including major banks, but also trust companies, finance companies and credit unions. Here are 6 great reasons to use a mortgage broker.
Ready to figure out your mortgage financing? I’m here to help!
