How Does My Credit Report Impact My Mortgage Application?
A healthy credit report helps you get the mortgage loan you want.
Anytime you apply for a mortgage, car loan, credit card, etc. your lender is required to check your credit. To do this a credit report is obtained, most often from Equifax Canada (alternatively TransUnion Canada is sometime used).
This report provides a summary of your credit history which is then used to determine your ability to manage credit, and therefore a credit report is a very important factor in reaching some of your financial goals.
Below is an outline of the contents of a credit report. For further details have a look at the Financial Consumer Agency of Canada.
What’s Included In Your Credit Report?
You’ll find the following items documented in your credit report:
- When you opened your account credit cards, retail cards, lines of credit and loans and mortgages – a new addition to the report
- How much you owe
- Whether you make your payments on time
- Whether you miss payments
- Whether you go over your credit limit
- Inquiries from anyone who has requested your credit report before
What Is A Credit Score?
A credit score is a three-digit number that is calculated using a mathematical formula based on the information in your credit report.
If your history shows that you are responsible at managing credit then your score is higher. However, you lose points for things that show you have difficulty managing credit.
To find out what counts toward your credit score, see the section called How To Improve Your Credit Score on the Government of Canada website.
In Canada, credit scores range from 300 to 900 points. The best score is 900 points. Lenders take this score into consideration when reviewing a mortgage application – the preference is to deal with clients with a score above 680, however it is our job to provide options for clients with lower scores.
HOW DO I OBTAIN MY CREDIT REPORT?
One option is to contact one of the two primary credit agencies in Canada but in today’s fast-paced app culture there are also many free credit reporting apps on the market.
HOW CAN I REPAIR MY CREDIT?
- Pay down credit cards and debts
- Limit the use of your credit cards
- Know your credit limits
- Contact the reporting agencies with any errors or discrepancies
Your credit report is very important in today’s world, especially if you are looking to take advantage of credit options available. Whenever possible is it best practice to be aware of where you stand, pay debt down, and know your limits.
Today there are many tools out there to help you not only keep track of your credit score for free and without penalty, while at the same time building your credit.
If you have any questions regarding your credit report or your credit score please contact us today. We’ll have additional tips and tools to help you get your credit under control.