HOW YOUR CREDIT EFFECTS GETTING A MORTGAGE

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

1. Capacity
2. Capital
3. Collateral
4. Character
5. Credit History
6. 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