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What you should know regarding your credit score
Buying a home is a significant financial milestone, one that requires patience, attention to detail and careful planning. As you begin the home buying process, you will need to understand your credit score and the impact it has on your ability to buy a home. Your credit score will determine the types of loans you qualify for and the long-term payment options that come with purchasing a home.
Why Is Your Credit Score Important?
Your credit score is a reflection of the way you have handled your finances up to this point. The score ranges from 300 to 850, but according to Experian.com, anything over 750 is considered good. Scores over 800 are considered excellent. The closer you are to 750, the better chance you have of qualifying for low-interest loans, which means you will pay less for your home in the long run.
If you are a first-time homebuyer and have zero credit, it can be tricky (but not impossible) to buy a home without a credit history. Your lender will be looking for proof that you know how to handle debt, make payments on time, and so on. Some quick ways to build credit from scratch include:
- Applying for a secured credit card and staying diligent about payments and maintaining your balances
- Co-signing with a trusted family member on a credit card, student loan or auto loan
- Staying current on rent payments and having proof from the landlord
Building credit takes time, but a long history of on-time payments and responsibly managed debt will help you build a strong credit score and make it easier to make big purchases in the long run.
How To Find Your Credit Score
The first step in understanding your credit score is to know your current credit card status. You can access your credit report for free from Equifax Canada and TransUnion Canada. It is important to remember that your credit report and your credit card are not the same things. Your credit report will tell you:
- Information about past credit history
- How much debt you have
- How long your credit accounts have been open
- Any collections or bankruptcies in your financial history
You can request your report and have it sent to you via mail and will typically receive it in 2-3 weeks. If you need your credit report right away, you can pay a small fee to access it online right away.
Getting to your actual credit score will require a fee. It is recommended to request your score from one, and then wait six months to request your score from the second. Spacing out your requests may help you get a more accurate score. Checking your credit report does not negatively impact your credit score, but checking your credit score too often could.
How To Improve Your Credit Score
If your credit score is below 740, not all hope is lost. There are a few things you can do to actively work in improving your score:
- Know your credit score. Many free and inexpensive services provide a detailed history of your credit score to help you determine areas in which you need to improve
- Focus on improving this score before going out and applying for loans
- Be diligent about not missing payments, paying on time, and not maxing out your credit card
- After reviewing your score, dispute any wrong information that is negatively affecting your score
- Pay down debts and refrain from going further into debt or opening a new line of credit
It does not happen overnight, but by being consistent in paying off the debt in a timely manner, you will see your credit score rise and eventually be in the right spot to qualify for a low-interest mortgage. The better your credit score, the lower your monthly mortgage payments.
Need Help Navigating The Financial Aspects Of Home Buying?
Jovi Realty has built a network of professional contacts that can help you navigate the credit score process. We can connect you with trusted industry leaders that can help you understand your current score. They will also offer advice on how to improve it. Once your credit score is in the desired range, your Jovi Realty agent can help you narrow down your home search and find the home that not only meets your needs but is also within your budget.
Contact Jovi Realty today with any questions regarding Vancouver mortgage rates, the current real estate market or to get connected with trusted financial advisors in the area who can help you with your credit.