Great Tips On Fixing Your Credit Score
Consumer debt is a constant in Vancouver life. We live in an expensive city with high expectations, and often people get trapped into trying to fit a particular image. I often see it in first time buyers in their mid-twenties who are starting to realize paying rent is sort of a waste of money, but they’ve incurred a lot of credit card debt.
It might seem overwhelming if the bank of mom and dad isn’t willing or able to bail you out, but don’t let that get in the way of your dream of owning a property. Competition is very noticeable these days in the mortgage industry, and because of that companies are often comfortable dealing with clients who have a lower credit rating – or even possibly a bankruptcy.
Fixing your credit score is achievable if you know how to approach it. Follow these simple steps and you’ll be getting the keys to your new home before you know it!
Going Over Your Credit Report
First thing you need to do is obtain the most recent assessment of your credit rating. You can pay for this online and get it immediately, or you can order it for free from equifax.ca or transunion.com and receive it by mail.
Initially you should go over the report and make sure there aren’t any reporting errors present. If there are errors present, you should immediately go through the process of disputing them with the credit bureau in question. This can take a few months, so make sure to plan for this, but correcting the issue is usually worth the wait.
When you analyze your credit report, you’ll need to decide whether or not some minor belt buckling will improve it enough, or if it’s time for major surgery. If you debt level is at at a very high level and you can’t figure out any way to improve it, it’s possible you might have to look into bankruptcy or a consumer proposal. The sooner you do this, the better, because it takes a minimum of two years before lenders will look at offering you their most favourable rate.
Often consumers will panic at the thought of a consumer proposal or bankruptcy, generally it’s a matter of pride and because they assume it will affect the chances of being approved for financing in the future. If you aren’t able to get credit for purchases as it is, is there any real negative to going down this road? In the long term, you’ll be closer to being able to own real estate after eliminating your debt.
Boosting Your Credit Rating
If you feel your credit isn’t perfect, but not overly flawed, it’s important to address why this is the case. Here are some iron clad, tried and tested methods to address it:
– Make sure all your monthly bills are paid on time! Even if your hydro bill is paid late, it’s possible this can be reported to the national credit agencies. These small things can affect your score, and can cost you money if you need to settle on B level financing.
– Open a tax free savings account or an RRSP and start putting money into it. Even a small amount will help you get that down payment you will eventually need. While savings aren’t reported, they will ultimately put you in a stronger position.
– If you are in a really bad position and can’t even get a credit card, it’s very advisable to get a secured credit card. Even if you have an extremely bad rating, many credit cards will provide you with a limit that is identical to your security deposit. This usually ranges from $250 to $1000. Using this method to improve your credit score is quite common these days, as ultimately every month will be reported just like a normal credit card. One thing to note, it’s very advisable that you pay your balance in full every month.
– Make sure you don’t close down any existing credit account, such as a line of credit. Keeping them on file will work in your favour, because it adds to your credit history. As a rule of thumb, the longer the account has been open, the better.
– Showing that you can be frugal and responsible with your available credit is a critical factor to improving your rating. Don’t put any large expenses on the card, and make sure to pay off the balance in full when it becomes due each month.
– If you do decide that carrying a balance is best for your monthly finances, then make sure it’s at a minimum. A good guideline is keeping it below forty percent of the available limit.
Making these changes to your finances will hopefully lead you to more healthy spending habits and improve your chances of getting a mortgage in the future. Saving money and taking steps to improve your credit rating score will make it possible to achieve real estate ownership.