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You must have heard that a good credit score in Canada can really bring you peace financially. However, it can help you get one more thing.
Any guesses?
Free rewards? Uh, think a little far. Good insurance rates? Um, almost there. A house? Damn, you hit the spot!
Well, if you want to get a good mortgage in Canada, you have to have a good credit score. You can’t just have a bad credit history and expect highly affordable premium rates.
You have to understand your credit score and history to know your mortgage eligibility. Yes, it is that important!
So, let us help you understand your credit score and build it in a good range for cheap mortgage rates. Let’s get started!
Is A Good Credit Score Necessary For A Good Mortgage?
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How many of you had a financial resolution in 2022 to own your dream house? Quite a lot, right.
And, how many of you had to drop the idea due to your bad credit score? Also, quite a lot.
Mind recalling the bad memories?
- The interest rates you were offered were way too out of the line?
- The lenders had an idea that you weren’t good at paying bills?
- The premiums of the mortgage were as high as the sky?
- The broker verified your credit information and found a negative error that you never knew was even there in the first place!
Ah, and the list goes on and on. So, to answer if having a good credit score is essential for a good mortgage, yes! It is!
However, did you think through why your loan application was rejected? Or, why were you offered such monstrous conditions?
“A bad credit score and a below-par credit history are the main reasons why a lender can reject your mortgage application!”
Of course, you can experience mortgage rejection even with your up-to-the-mark credit score and history, but that’s something to discuss later.
Now is the time to enlighten you on fixing your bad credit for a good mortgage.
Here’s how you can do it without any stress or financial anxiety:
Get Your Credit Score Ready For A Good Mortgage
If you want to build credit fast or raise your credit score in no time, keep reading!
Repairing credit scores takes time and continuous effort. However, sometimes you need to see quick changes in your credit report to land the mortgage deal.
Here are some easy and fast credit building tips that could help:
1. Rapid Credit Rescore
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Have you ever heard of it? Do you know what it means? But, more importantly, can this service help you get the mortgage or even qualify for it?
Craig Berry (a mortgage expert) defines a rapid rescore service as submitting the consumer’s credit rebuilding efforts directly to the bureaus to notice the positive changes in days.
Yes, it’s exactly as it sounds! You get to see the changes in your score rapidly as the score will get updated fast as the lender will appeal to speed up the rescoring process.
Yes, it’s instead a service provided by mortgage lenders or brokers. It’s not something a consumer can do.
Credit fellows! Add the new “can you provide rapid rescore service?” to your questions to ask lenders list!
2. Correct Credit History
Rebuilding credit for good mortgage rates might seem too hard and strict to follow.
However, applying a few working strategies while making your financial decisions can significantly influence your credit life. One of them is checking your credit report!
- You need to check your credit to avoid any surprise from the lender
- No, we don’t mean the monthly or regular look-ups you can do on your credit account or credit app
But, the one that involves requesting a credit report for all that thorough investigation.
- Your mortgage lender will surely run a credit check, so isn’t it wise to run a credit report check yourself?
- There are equal chances that a credit error might be ruining your score
- Finding the credit report errors and disputing them timely can help you increase your score (if there’s a technical error)
So, it’s necessary to keep your report error-free and check credit score before applying for the mortgage.
3. Credit Limit Increase
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Are you a total credit card person? Someone who makes major monthly payments using their credit card?
Yes, isn’t it great? It can help you increase purchase points. But, do you know what other things it can increase? Your credit utilization ratio!
So, what you can do is ask for a credit limit increase if you’re qualified and eligible to do so.
- As per Forbes research, increasing credit limits can help consumer reduce their credit utilization ratio, thus improving credit scores in return
- If you want to get a credit card to meet your high purchases, doing it right before your mortgage application might not be a good idea, so it’s best to ask for a credit limit increase
However, one thing to note here is that it can sometimes result in a hard inquiry on your account.
So, you have to ensure you have enough time to fix any wrong before applying for the mortgage.
4. Short-Term Credit-Builder Loan
Yes, you can also get a credit rebuilding loan before applying for the mortgage. The loan estimate can vary depending on how fast you need to recover your score.
You can also have a detailed talk with your lender to discuss the time estimate and terms with your updated score.
The good news is that you can raise your credit score between 10-100 points depending on your responsible credit nature.
Unlike other loans, the credit-building loan can also improve your credit and payment history.
5. Negotiate Your Debt
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Clearing your outstanding balance might be the quickest way to improve your credit score.
Of course, entirely deleting all the debt and negative balances can be hard, but you can negotiate with your card provider on some median terms.
You can apply for a personal loan to clear your debt and outstanding balance before preparing for the mortgage.
Doing so can help you reduce the utilization ratio and credit to debt value, which will boost your credit score.
6. Get Help From A Supplementary Card
Just like you can build your credit history with a secured credit card, you can also consider getting help from a supplementary card owner.
- You can become the primary cardholder for a supplementary card owner to build your good credit history
- However, give a proper thought in choosing the supplementary card owner as their late or missed payments can also affect your credit score
It’s more like becoming an authorized user for a perfect credit card owner. Just make sure you don’t have to pay any price in choosing the wrong person.
7. Balance Transfer EMI
If you need to see quick results, you must set your credit history and credit record straight. However, it can be nearly impossible if you have high debt or balance.
But, paying all the due payments instantly can be hard when you’re already dealing with so many other things financially. So, here’s what you can do instead:
- Try negotiating with your service provider or bank to transfer the outstanding credit into an EMI, which you can pay like a monthly balance
- However, it might cost you more interest rates (2% to 3%) than usual
Bonus: Click to read Investopedia’s research on equated monthly installment to understand better how this method works.
8. Avoid Overspending
This might seem too obvious. But, when you are preparing to buy a home that you’ve been dreaming for all your life. You can surely make some oopsies with your credit card here and there.
However, a pro tip to mention here is that you must get the mortgage first and then buy the items you need for your home.
Moreover, overspending will only increase your outstanding balance and your credit debt. So, you need to keep it down to help improve your credit score.
And, even if it increases your credit score by 50 points, it’s still a good start.
Bottom line
The key to rebuilding credit for a good mortgage is using it responsibly and smartly.
Trust us when we say it will surprise you how your little credit changes can improve your financial life for the good.
Moreover, the rates differ drastically for good and bad credit scores, so it’s all worth it to make an effort. And, you never know some mortgage lenders might acknowledge your application considering how hard you’re working to get that loan.
Lastly, good luck in getting your credit ready for the mortgage!
