Tips To Improve Your Credit Score
Diane Gogar • July 22, 2020
Your credit score is critical to you obtaining credit. Applying for a car loan, a consolidation loan, a line of credit, a mortgage, or even a cell phone can be a challenge if your credit score is low. Your application may de declined or you may get a higher rate on credit if your score is low. The lower the score, the higher the risk and the higher the interest rate. Lenders are not comfortable lending to a client with late payments or collections on their credit bureau.
Your credit score is also very important to a landlord. You may be turned away from renting an apartment if there are late payments on your credit bureau. This is a high risk application because it tells the landlord that the rent payments will be late, if credit card payments or loan payments are late.
Why is having good credit important?
A bureau that shows payments on time tells a lender that this client is responsible towards credit and will be responsible in the credit applied for. Lender feels inclined to lend here.
A bureau that shows a lot of credit cards with high balances tell a lender that this client may be using credit cards to supplement their income, or is a big spender. This scenario will result in a lower credit score and can result in less money being lent by the borrower and also a higher interest rate.
A bureau with constant late payments and collection items say that this client is irresponsible towards his obligations. Lender may require security for a loan in this instance because the likelihood of their loan not being paid is high. The lender may decline application even if there is security, because they do not want to take on the risk of non-payment.
So what should you do to keep your credit score high, or to improve your credit score?
- Make all payments on time, even if it is just the minimum. A one day missed payment is registered as a 30 day late payment on your bureau. You can make this easy by paying online, or setting up a pre-authorised minimum payment by the credit card company.
- Keep credit cards balances below half of the limit. If a card limit is $5000.00, your goal should be to keep the balance around $2000.00. The ideal would be to stop using credit card until you have brought the balance down to below half.
- Pay telephone bills on time. Yes, phone bills are registered on your credit bureau. If there is a dispute with a phone company, pay the bill before it goes into collection and then continue the dispute. The phone company sends uncollected bills to a collection company. It is registered on your bureau as a collection item and causes a huge drop in your credit score.
- Do not close off credit cards until you confirm the balance is zero. Sometimes there is an interest payment, depending on the date you close off card and you may think the card is paid off, but there is a small balance, which if goes unpaid will register as a late payment.
- Do not close card until card is paid. Sometimes, a client may have a balance on a card and doesn’t want to use it anymore. So they cut it up and continue making payments . They ask the credit card company to close the account. The credit card company puts a message, ‘closed by credit grantor.’ This results in a R9 on the credit card and affects a credit score badly. It is a reason for an application to be declined. It says to a lender that client could not pay the card and the credit card company closed it .The other side of asking a credit card company to close off a card when it is fully paid, is a message on the bureau, is ‘closed by consumer.’ This is a good message, It says you no longer wanted the card and you paid it off. It says you can handle credit responsibly.
It is important to check your credit at least annually to ensure everything is well with your credit and there are no mistakes. These can be other credit cards or loans or collection items that do not belong to you. - Your credit card limits should be at least $2500 or more. If you have one card with a limit of $1000.00 it does not give a lender a correct picture of how you can handle credit, if you are applying for a mortgage of $500000.00
Aim for 2 cards with at least $2500.00 limit.
Credit cards and loans are necessary to building a healthy credit bureau. These must be used responsibly so that you can have a better score, and hence get the necessary and intelligent credit you require for your present and future financial goals.
If you have any questions about how to improve your credit score, please contact me directly.
There is no doubt about it, buying a home can be an emotional experience. Especially in a competitive housing market where you feel compelled to bid over the asking price to have a shot at getting into the market. Buying a home is a game of balancing needs and wants while being honest with yourself about those very needs and wants. It’s hard to get it right, figuring out what’s negotiable and what isn’t, what you can live with and what you can’t live without. Finding that balance between what makes sense in your head and what feels right in your heart is challenging. And the further you are in the process, the more desperate you may feel. One of the biggest mistakes you can make when shopping for a property is to fall in love with something you can’t afford. Doing this almost certainly guarantees that nothing else will compare, and you will inevitably find yourself “settling” for something that is actually quite nice. Something that would have been perfect had you not already fallen in love with something out of your price range. So before you ever look at a property, you should know exactly what you can qualify for so that you can shop within a set price range and you won’t be disappointed. Protect yourself with a mortgage pre-approval. A pre-approval does a few things It will outline your buying power. You will be able to shop with confidence, knowing exactly how much you can spend. It will uncover any issues that might arise in qualifying for a mortgage, for example, mistakes on your credit bureau. It will outline the necessary supporting documentation required to get a mortgage so you can be prepared. It will secure a rate for 30 to 120 days, depending on your mortgage product. It will save your heart from the pain of falling in love with something you can’t afford. Obviously, there is nothing wrong with looking at all types of property and getting a good handle on the market; however, a pre-approval will protect you from believing you can qualify for more than you can actually afford. Get a pre-approval before you start shopping; your heart will thank you. If you’d like to walk through your financial situation and get pre-approved for a mortgage, let’s talk. It would be a pleasure to work with you!
Refinancing your mortgage can be a smart financial move, but how do you know if it’s the right time? Whether you’re looking to lower your monthly payments, access home equity, or consolidate debt, refinancing can offer valuable benefits. Here are five key signs that it might be the right time to refinance your mortgage in Canada. 1. Interest Rates Have Dropped One of the most common reasons Canadians refinance is to secure a lower interest rate. Even a small decrease in your mortgage rate can lead to significant savings over time. If rates have dropped since you took out your mortgage, refinancing could help you reduce your monthly payments and save thousands in interest. ✅ Tip: Check with your mortgage broker to compare your current rate with today’s market rates. 2. Your Financial Situation Has Improved If your credit score has increased or your income has stabilized since you first got your mortgage, you might qualify for better loan terms. Lenders offer lower rates and better conditions to borrowers with strong financial profiles. ✅ Tip: If you’ve paid off debts, improved your credit score, or increased your savings, refinancing could work in your favour. 3. You Want to Consolidate High-Interest Debt Carrying high-interest debt from credit cards, personal loans, or lines of credit? Refinancing can help consolidate those debts into your mortgage at a much lower interest rate. This can make monthly payments more manageable and reduce the overall cost of borrowing. ✅ Tip: Make sure the savings from refinancing outweigh any prepayment penalties or fees. 4. You Need to Free Up Cash for a Major Expense Many Canadians refinance to access their home’s equity for renovations, education costs, or major life expenses. With home values rising in many areas, a refinance could help you tap into that value while still keeping manageable payments. ✅ Tip: Consider a home equity line of credit (HELOC) if you need flexible access to funds. 5. Your Mortgage Term is Ending, and You Want Better Terms If your mortgage is up for renewal, it’s the perfect time to explore refinancing options. Instead of simply accepting your lender’s renewal offer, compare rates and terms to see if you can get a better deal elsewhere. ✅ Tip: A mortgage broker can help you shop around and negotiate better terms on your behalf. Is Refinancing Right for You? Refinancing isn’t always the best move—there can be penalties for breaking your current mortgage, and not all savings are worth the switch. However, if you relate to any of the five signs above, it’s worth discussing your options with a mortgage professional. Thinking about refinancing? Let’s chat and find the best option for you!
