One of the important factors in home ownership is understanding things like your credit score.  It is often overlooked and some people don’t pay much attention to this metric until they begin the mortgage discussion.

Credit scores range from 300 to 900, the higher your credit score the better. If you are one of the few who are able to achieve a score of 900 (which is quite rare), you would then be considered a “Unicorn”! Ideally, you should be aiming for a credit score of at least 680(or better) for at least one of the borrowers on the mortgage application.

This score is based on spending habits and behaviours including:

• Previous payment history and track record of paying your credit accounts on time
• Your current level of debt and how much credit you use
• How long you have had your credit in good standing
• Number of credit lines you have open

If you want to improve your credit score, you absolutely can. It can be a gradual process, but it is well worth it. Here are some tips to help you get started.

Pay Your Bills: This seems pretty straightforward, but it is not that simple. You not only have to pay the bills, but you have to do so in full AND on time whenever possible.  Paying bills on time is one of the key behaviors lenders and creditors look for when deciding to grant you a loan or mortgage. If you are unable to afford the full amount, a good tip is to at least pay the minimum required as shown on your monthly statement to prevent any flags on your account.

Pay Your Debts: Whether you have credit card debt, a car loan, a line of credit, or a mortgage, the goal should be to pay your debt off as quickly as possible. To make the most impact, start by paying the lowest debt items first and then work towards the larger amounts. By removing the low-debt items, you also remove the interest payments on those loans which frees up money that can be put towards paying off larger items.

Stay Within Your Limit: This is key when it comes to managing debt and maintaining a good credit score. Using all or most of your available credit is not advised. Your goal should be to use 30% or less of your available credit. For instance, if you have a limit of $1000 on your credit card, you should never go over $300. NOTE: If you find you need more credit, it is better to increase the limit versus utilizing more than 30% of what is available each month.

Credit and Loan Application Management: Reduce the number of credit card or loan applications you submit. When you submit too many credit card applications, your credit score will go down, and multiple applications in a short period can do more damage. You’re best to apply for one or two cards and wait to see if you are accepted before attempting further applications.

If you have questions about your credit score, don’t hesitate to reach out. Whether you want to check your score or find out how you can improve it, my door is always open.