Credit Score and its Impact on Mortgage for New Home
Your credit score is used by lender to know your creditworthiness and to decide whether they should lend you money or not. In Canada, credit score range from 300 to 900 points. As per Trans Union, a Canadian credit report agency, 650 is the magic middle number - a score above 650 will likely qualify a lender for a standard loan, while a score below it may make it difficult for borrowers to receive a new credit. In general practice, if your credit score is more than 700, it demonstrates to the lender that you can use creditworthiness and he should feel comfortable in lending you money. On the other hand, the lower credit worthiness check demonstrates that you have mismanaged your credit.
Lenders generally use credit scores to set your interest rate and credit limit. If you have a high credit score, you may be able to get loans at lower interest rate and similarly, you might have to pay higher interest on loan, if your credit score is poor.
How Credit Score is Built?
Credit score is built on the basis of creditworthiness analysis prepared by credit reporting agencies in Canada. These are the private agencies engaged in collecting, storing and sharing information about how you use credit. A credit report agency is also known as a credit bureau or just a bureau. In Canada, there are two main credit reporting agencies: Equifax Canada and TransUnion Canada.
You can request both agencies to get one free copy of your credit report each year. You can also look up to your credit score on paying a fraction of amount as fee to the credit report agency. It is a sound practice to check creditworthiness of a company annually to make sure there are no repercussions in it.
If your creditworthiness calculator score varies from 600 to 900 points, you may get a loan from prime lenders like major banks. If your credit score is 600 or less, you may still get loan from private lenders but rates will be higher than normal interest rate.
Your Credit Score and Mortgage
Your credit score affects the decision of lender to lend you a loan. It also helps you to know from where you can borrow. Lender also uses it to decide your interest rate on mortgage. A poor credit score may mean you will pay higher interest, offered a smaller credit limit or your loan application simply rejected outright.
If your credit score varies from 600 to 900 points, you may get a loan from prime lenders like major banks. If your credit score is 600 or less, you may still get loan from private lenders but rates will be higher than normal interest rate.
Tips to Boost your Credit Score
- The best way to boost a good your creditworthiness factors is to repay that credit on time all the time. One should set up automated payments for monthly credit card, utility, rent, mortgage and other bills.
- One must pay bills on time as delinquent payments and collections have a negative impact on a credit score.
- One should keep balances of credit cards low and apply for new accounts only as needed.
- A missed mortgage payment has huge impact on your credit rating. Some lenders can be very slow in informing credit agencies when debt has been repaid. One should check for credit report carefully to make sure that it is accurate and up to date.