Five Credit Factors You Should Understand Before Applying for Credit Products

Author: Universal Mortage Solutions | | Categories: First Time Home Buyers , HOME BUYING , RE-FINANCING , RENEWING , REVERSE MORTGAGES

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Mortgages are a necessary part of life for most of us and having excellent credit scores play a crucial role in making the mortgage process a whole lot easier. With your credit history being a determining factor in your mortgage obtaining process, building a solid credit history and maintaining a high credit score becomes essential.

Failing to do so can have a dramatic impact on your quality of life now and in the future when you're considering applying for a loan or even a credit card. At Verico Universal Mortgage Solutions Inc., we want to ensure that you are not turned down when you apply for a credit card or loan and get favorable rates for financing. To help you do so, we have a list of five credit factors that will help you understand and build your credit scores.

1. Previous credit.

The more often you pay your debts on time and in full, the higher your score will be in the payment history section. Late payments, judgments and having your debt written off by your creditor grantor have a severely negative impact on your score and remain on your record for seven years. Pay at least the minimum payment required, on time, every month to improve your credit score in this area.

2. Current level of debt.

Credit scores begin to decline any time you approach 75% of your credit limit on any one account. Never exceed 75% of your limit and never “max out” any line of credit or credit card or you will lose many points for each account. To improve your credit score, pay down any account to under 75% or less of your credit limit and ensure you stay well below that on any credit card or line of credit. Also, keep an eye on the total of your minimum payments from all debt. Ensure this never exceeds 32% of your gross income (if you are renting include your rent in this calculation).

3. Credit life.

The age of the oldest account on your credit file is a good indicator of how much credit experience you have. If your oldest account is less than two years old, you are not considered to have established credit, and you will have a lower credit score. If you don’t have credit and want to improve your score in this area start with a Secured Credit Card, charge one small item per month and pay it off in full, on time, every month but the ultimate goal is two lines which have a minimum balance of $2000 each.

4. The pursuit of new credit.

This is the area that surprises most clients. Every time you inquire about credit – apply for a credit card, loan or line of credit or ask about your ability to buy or lease a new vehicle or cell phone, etc. the vendor will run a credit check on you. If you allow more than six credit checks per year, you will lose many points for each additional credit check. Any vendor with a credit bureau account can run a credit check on you using any two of the following pieces of information name, social insurance number, and date of birth. Plan which credit card companies you prefer to deal with and don’t apply for any others – this includes store credit cards. Also, never give your Social Insurance Number (SIN) or date of birth to anyone. Be wary about leaving your Driver’s License with the dealership when you test drive their car, and specifically request that your credit not be pulled. Plan ahead when shopping for credit, protect your personal information and keep your credit checks in check.

5. Types of credit.

Banks want to see that your credit is well balanced. A mixture of a credit card, auto loan, and personal student loans is more positive than a concentration of debt from one type of credit only. Too much of any one type of credit, i.e., more than three lines of credit (LOC’s) or credit cards, begins to weaken your score.

If you’re looking for more ways of bolstering your credit scores, reach out to Verico Universal Mortgage Solutions Inc. We have over sixteen years of experience as mortgage brokers and pride ourselves on our ability to help clients improve their credit, obtain a mortgage and fulfill their dreams. We can help you with new purchases, business for self, reverse mortgages, and much more. Leann Scarlett, our mortgage broker in Central Alberta, will help you fulfill your mortgage requirements. To learn more about what we do, please click here or get in touch with us here for any mortgage-related information you need.

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