Lenders evaluate your credit report and credit score.
In fact, your credit report reflects your financial reliability. The higher your score, the more likely you are to obtain a mortgage at an advantageous rate and under good conditions.
Your credit file is a decisive piece in your financing requests (car etc.) and especially when buying your property.
It is an element that will follow you throughout your projects. This information is available and visible for a period of 7 years.
If you have bad credit, there are several ways to improve your credit rating.
Your credit score is crucial when applying for a loan. In fact, the higher your credit score (minimum 300 and maximum 900), the more you will demonstrate that you are able to repay your debts.
It allows banks to evaluate the risks they would take by financing you but also the amount they would be able to lend you.
Please note that a high score does not guarantee that you will receive your loan: other documents are attached to your file to ensure your solvency (income for example).
Where is your score set?
Two national credit reporting agencies will determine your score: Equifax and TransUnion.
Only one of the two scores is usually required for your file and the result may differ by a few points depending on the agency.
In addition to your credit score, you will have a score for each line of credit ranging from 1 to 9.
1 being the score that guarantees that you are paying your debts correctly and, 9 being the score attributed to accounts in distress, in collection (account in collection), or in bankruptcy.
With each late payment, this score will increase by one point. The maximum being + 5 points for a 120 day delay.
Your score and your rating will define your management capacity and confirm that you are respecting your financial commitments.
Calculating your score
Your payment history is the most important factor in determining your score. The way you pay your credit accounts, loans (car or student loans for example) will define your score.
Late payments on your bills and overdue payments will also affect your score. The frequency of late payments and the amounts owed will be evaluated in order to readjust your score downward.
Also, the ratio between your available credit and your used credit will increase your score if it is positive. This calculation will determine your exact margin or total limit.
In order to best evaluate your score and your file, you may have to provide additional information. Among other things, the credit applications that you are already repaying or those that you have already made. This request for additional documents may impact your score depending on the case.
Some tips to optimize your score
- Do not exceed the equivalent of your monthly salary (total credit limit, excluding mortgage)
- You must use a maximum of 60% of the limit on your credit card, above that the score will drop.
- Pay off high-interest debt first
- Set a monthly budget based on your expenses
- Don’t apply for more credit
- Check your credit report regularly to ensure the accuracy of your information. This service is free (once a year)
- Save as early and as much as possible
- Have 2 credit cards or a credit card and a loan (car or student for example) with a minimum limit of $1,500.
In short, your credit score defines your borrower profile and whether or not you are able to repay within the time frame you have agreed to.
It is important to take care of your credit rating when buying a house .
Our mortgage brokers will be there to accompany you, advise you and help you optimize your score and therefore your credit file.
It is a free service that will allow you to present a solvent file to lenders. Thanks to this service, it will be easier for you to obtain an advantageous rate and good conditions.
Newcomers or permanent residents, contact us to establish a solid investment project now.
