Chapter 9 – Improving Credit
The majority of Canadian citizens have a credit score. Scores can range from 300 to 900. Anything above 680 is considered good credit and you can usually receive a full range of borrowing options. Once you get below 600, your options will become more limited.
Your score is composed of a few different elements from the past 7 years:
- payment history
- amount of debt
- history of credit (are you a new borrower or do you have a long credit history?)
- types of credit (mortgage/visa/student loan)
- types of credit you are pursuing
- are you high maintenance?
Although you can’t expect to increase your score dramatically over night, there are a few things you can do to start:
- If you are maxed out on debts, pay some off. Lenders don’t want a client who looks like they are over extending themselves. You can immediately improve your score by reducing your debt.
- If you have NO debt, it is also bad. No history is risky. The BEST thing you can do to improve your credit is take out a visa, spend (under your limit) every month, and pay it off completely every month. This shows that you’re responsible with a loan.
- Try to avoid calling the credit companies and doing credit checks frequently. Every time your credit score is pulled, it affects your score. This is one advantage of using a mortgage broker, since we only pull your score once and submit it to all the lenders as oppose to having it pulled each time you apply at a different bank.
- If you are constantly getting turned down for loans, it will show up on your credit score. Choose wisely.
Any score can be repaired over time, but it makes a lot of sense financially to keep it high. You will get the best rates when you need them.