How to Improve Your Credit Score
Your annual credit report is a key determining factor in being approved for a mortgage and is something a lender should look at before determining whether or not to approve your mortgage application. Your annual credit report and credit score are two different things. Your credit score is a three-digit number between 300 and 900 - the higher the better. Your annual credit report on the other hand, shows your history of bill payments and whether they were on time or not.+
Get an Annual Credit Report
Canada has two major credit bureaus, Transunion and Equifax. Every Canadian is entitled to a free annual credit report from each of these credit bureaus, which can be applied for by mail. Otherwise, credit reports are available online and instantly from these credit bureaus for a small fee, usually less than $20 when a credit score is included.
It's best to avoid the free credit report websites that are floating around, because while some of them do offer free credit reports, you only get them after signing up for a monthly monitoring service that most definitely isn't free.
An annual credit report can give you a snapshot of your personal financial health through the eyes of a lender or credit card company, let you know any key areas you can improve on and help you spot errors on your credit report - which are more common than you might think.
Fixing Your Credit Score
If your credit score is low, begin playing catch-up with any missed payments as soon as possible, and make your credit card payments on time every month. Once your credit card payments are current, focus on paying down your credit card balances.
There are also a few things that can affect your credit score you might not know about:
Applying for more credit: lenders and credit card companies will conduct a "hard inquiry" on your credit history before extending more credit, which can lower your score.
Lenders lowering limits: The lower your balance on your card, the higher your score. But the ratio of balance to available credit is also considered. For example, if you have a $5,000 balance on a $20,000 card but your credit card company lowers your limit to $15,000 (which they sometimes do without telling you), your balance to available credit ratio changes and your credit score can take a hit. Keep your balance below 33% of your limit if you can.
Closing old accounts: closing an unused account also erases any previous credit history with that particular account, which can make your credit score dip. Your score is also based on the age of the accounts, so keeping older accounts around can boost your score.
For further information on your credit score, saving for a new home, buying or selling real estate, please contact the real estate team of:
Paul Magnus, Timothy Burke & Kalev Koop - Sales Representatives
Coldwell Banker Terrequity Realty, Brokerage - 416-366-8800
This article reprinted from our October 2011 E-newsletter