What is your credit rating?
Whenever you apply for a mortgage, loan, car loan, home equity loan or other financial packages, there is always a credit application to see if your credit rating is accepted. But what happens if you have bad credit? How can you improve it?
What is a Credit Report?
A credit report is a summary of all your credit history. If you have ever used a credit card, taken out a mortgage, personal loan or even used a “buy now, pay later” program to buy anything, you will have a history of your credit.
When you borrow money or apply for credit, lenders send information about your accounts to the credit reporting agencies.
The report also includes information such as:
- when did you open your credit card or loan account
- how much money do you owe
- do you make your payments on time
- have you ever missed a payment
- do ever go over your credit limit
- have you ever declared bankruptcy
- cellphone and internet account information
- chequing and saving accounts that have been closed due to money owing or fraud
What is a Credit Score?
When you get your credit score, it is a three-digit number that is calculated based on the information in your credit report. If you use credit responsibly, you get points; but you lose points for things such as paying credit cards late or other issues that show difficulty managing credit.
In Canada, your credit score will range from 300 – 900 points, with 900 being perfect credit. As you work with credit cards, mortgages, car payments, loans, home equity loans and more, your credit score will change over time.
It is up to the lender to decide if they want to loan money to you based on your score. The lower your score the higher the risk is to the lender, which results in higher interest rates and lower availability of cash. If you have a higher credit score, it shows that you can handle credit more carefully which allows you to borrow more money at lower interest rates. Having a great credit score can save you thousands over time.
Lenders will also look at other things such as your income, assets such as your home or car, as well as the type of work you do. Often people who are self-employed have a harder time getting credit than those employed in traditional jobs with steady streams of income.
How do they calculate your Credit Score?
While the actual method used to calculate your credit score is not available to the public, there are ways to improve your credit score based on what is used to get your overall score.
This is by far, the most important element of your credit score. It shows when you pay your bills, have you been late or missed a payment, if you have debts that were written off, if you have a collection agency trying to get money from you and if you have declared bankruptcy. Your score is damaged if you:
- make late payments
- have a collection agency trying to get money from you
- declare bankruptcy
- stop making payments due to a dispute (they are still late)
- late student loan payments
- problems with your savings or chequing accounts
- mobile phone and internet account payments may also be included.
Use of Available Credit
How much of the credit available to you do you use? This is an interesting factor, since people always look at how much credit they can get, rather than how much they use. If you use a larger percentage of your credit, or all of it, lenders may see you as a higher risk for loans.
Length of Credit History
The longer you have an account open and use it, the better it is when your credit score is calculated. If you transfer the balance from an old credit card to a new one, or you open new credit accounts, this can hurt your credit score.
Number of Inquiries
When you apply for credit, a mortgage, a credit card, a loan, a car loan, it is recorded as an inquiry. It is normal to look for credit once in a while, but if there are too many inquiries, it can hurt your score and make lenders less likely to loan you money. This makes it look like you are living way beyond your means and don’t have the ability to pay back what you owe.
If you request your own credit report, or businesses are updating their records to see if you qualify for an increase in your credit limit, this does not hurt your credit report.
Shopping around for a Mortgage
If you shop around for a mortgage, as long as it is done within a 2 week period, it will be recorded as one inquiry. This is challenging if you look yourself, when you are busy with work, family and life.
This is one of the many advantages of using a mortgage broker. When a mortgage broker shops around to look for the best possible mortgage rate and loan type for you, he or she will do so quickly, thus ensuring that it will be recorded as one inquiry. It is in the best interest of the mortgage broker to get you the best possible rate, so helping to keep your credit score in a good range is important to him or her.
Different types of Credit
While many people think that having different types of credit can hurt your credit score, this is not true. If you only have one type of credit card, for example, this will actually hurt your credit score.
Having a variety of credit types, such as a car payment, credit card, home equity line of credit, credit line, or other loan will increase your score since it means you can carry a variety of credit and maintain your payments on time. As long as you can afford to continue to pay off your debts, and manage your credit wisely without taking out more than you can handle, it will assist you in getting a better credit score.
Improving your Credit Score
It is really important to improve your credit score so that you can get lower interest rates, better amounts of credit when you need it – such as when you buy a home, and to improve your ability to successfully get a loan.
To improve your credit, try to do the following:
- Pay your bills on time.
- Pay the full amount owed on the due date. If you can’t do this, at least make the minimum payment.
- Pay off your debts as quickly as you can.
- Do your best not to go over your credit limit on your credit card or line of credit
- Don’t make too many applications for credit in a short period of time
- Make sure you have a credit history with mixed types of credit
- Consider taking out a home equity line of credit to pay off high interest loans to allow you to pay off your debts more quickly.
Improve your Credit – Contact One Stop Mortgage Corp today!
The team at One Stop Mortgage Corp. can help you improve your credit. With one simple phone call you can get access to excellent mortgage and home equity loan packages that suit your life, help your credit score and simply things. A home equity loan from One Stop Mortgage Corp. can be used to pay off high interest credit cards, consolidate your debt and simplify your monthly payments by creating one lower monthly payment. This simplifies your life!
Contact One Stop Mortgage Corp today and get cash when you need it most. Even if you are self-employed, or have a poor credit score, they can help you.
Even if you are midway through a mortgage, or you aren’t sure if you have the right type of mortgage for you, the friendly and experienced team of mortgage and home equity loan specialists at One Stop Mortgage can give you advice and set up the best mortgage for you. Since 1994 we have helped people get the best mortgages and home equity loans to fit their lives. Contact us today and find out how we can help!
A simple phone call to 1-877-874-8988 or 604-874-8988 or an email to firstname.lastname@example.org can help you find the best loan product to fit your needs, reduce the interest payments and improve your credit rating and credit score.
Even if the bank turns you down, or your credit-rating is not accepted elsewhere, we can help.
1 877 874 8988 (toll free)
604 874 8988
604 874 9109 (fax)
Or simply fill out the contact form here