The Importance
of Your Credit Rating to obtain a Mortgage
So you want to buy a home? Well
first you will need to be approved for a mortgage. Before approving you for a
mortgage, lenders will want to see how well you have paid your debts and bills
in the past. This is something that isn’t taught enough in my opinion. The
importance of paying your bills on time and not racking up all kinds of debt
should be taught more in schools and by parents. Far too many people have to learn
these valuable lessons though the School of Hard Knocks.
Lenders for a mortgage simply
get a copy of your credit history (credit report) from a credit
bureau to check these things. This provides them with information on your
financial past and use of credit. Before your lender sees your credit history,
you should get a copy for yourself to make sure the information is complete, accurate
and worth applying for a mortgage. Simply contact one of the two main
credit-reporting agencies (Equifax Canada Inc. or TransUnion of Canada) to get
a copy of your credit report. There is often a small fee for this service.
Lack of Credit
History
If you have no credit history,
it is important to start building one by, for example, applying for a standard
credit card with good interest rates and terms, making small purchases and
paying for them as soon as the bill comes in.
Fixing a Credit
Record
If you have bad credit, lenders
might not want to give you a mortgage loan until you can re-establish a good
credit history by making debt payments regularly and on time. Most unfavourable
credit information, including bankruptcy, is dropped from your credit file
after seven years. If you have bad credit, you may want to consider credit
counselling.
Despite your poor credit history,
you might still be able to get a mortgage loan if you have a relative such as a
family member willing to be a guarantor or co-signer on the loan. This person
must meet the lender’s borrowing criteria, including good credit history, and
is legally obligated to make the mortgage payments if you do not.
The six “C’s” of
credit
- Capacity
- Capital
- Collateral
- Character
- Credit History
- Common Sense
Your
credit report is crucial not only for getting a mortgage when purchasing a
home, but so many other areas in your life. Even if it’s just the minimum
payment, always pay your bills on time. To get connected to a mortgage broker
nearest you for a pre approval or credit counselling contact me today!
Makini
Smith
Sales
Representative
RE/MAX
First Realty Ltd., Brokerage
www.makinismith.com
