7 Ways To Build and Improve Your Credit Rating

Jeff Evans

I quite often meet with new clients who want to apply for financing and are looking for the best “A” mortgage rate possible. Everything looks good…until I check their credit. There are many different cases where clients of mine have poor credit for no really good reason. It is always rationalized to me by saying “The minimum payment is only $10 per month, I didn’t think it was a big deal” or something similar to that effect.

I would have to imagine that a significant amount of growth in the economy and billions of dollars in unnecessary high interest debt is being lost due to lack of understanding of the credit bureau system and carelessness of borrowers.

With this in mind, here are a few facts about credit bureaus and ways that you can improve your credit.

  1. Make your minimum payments on all borrowing. This is the most critical single issue with credit and it stays with your bureau for 6 years, although it weighs less on your score the further into the past it is.
  2. Keep your loan balances below 70% of your limit as much as possible. The credit bureau algorithms heavily penalize credit that is close to maxed out, although this is easier to fix and does not stay with you for the long term if you pay down your limits.
  3. Use it or lose it. Having credit with a zero balance on credit that is never used is not really helpful in determining your credit worthiness. Use all your credit once a month, (even if the purchase is a small one) and pay in full when the bill arrives if you wish to improve your credit score but avoid interest charges.
  4. If you have a balance on a high interest loan, find out what products the lender offers with a lower rate and ask to transfer the credit to those. For example, I had a client who had a credit card that they were carrying a balance on and paying interest on. They simply called the bank and asked to close the card and open a credit line instead, and the bank was able to do that for them without even checking their credit. This can help make debt more manageable, easier to pay down, and will ultimately improve your credit score.
  5. Have at least 2 different lending products (line of credit or credit cards). If you have less than 2 credit products, you will often not be eligible for lenders products. This is particularly true with mortgages.
  6. If you need to get a high interest loan to establish credit, don’t get a car loan. I have had clients come to me who are paying 20% interest on a car loan who told me they had to get the loan to establish credit. There are many other better ways to do this that will be much less expensive than a high interest car loan.
  7. Reference lenders from utility and cell phone companies can help you to get started in building credit. If you have several different bills that you pay every month, even if they are not listed on your credit bureau, they can help you show responsibility and can help when you are applying for credit.

There are many different things that you can do to build or improve your credit, and every circumstance is an individual one. Part of what I do with my clients is to council them on this, and even if I cannot help them buy a home now, I can tell them what they need to do to improve their situation so they can qualify in the future.

If you are looking for a mortgage to buy or refinance a home and are concerned about your credit and need someone to help you navigate the way for you, then fill out the form below and I will be in touch with you shortly.

Author: Jeff Evans

I am a mortgage broker, hair salon owner, squash player, student, and husband, aspiring to do good for people.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles

home buyer mortgage broker
First Time Home Buyers Mortgage Broker Tips And Tricks
Jeff Evans
No Comments

Among the services I provide to my clients, I consider myself to be a "first-time home buyer mortgage broker".  As a first time home buyer mortgage broker, I know how difficult it is to get into the real estate market, particularly in Vancouver, and it brings me a particular amount of job to help someone get past the challenges if being a first time home buyer.

I have recently completed an e-book and will be launching it soon.  I believe it will be very helpful for not just first-time home buyers, but for anyone who is not as knowledgeable in residential mortgage lending, about how to make your home buyer mortgage broker application appealing to a mortgage lender.

As a sneak preview, here are three tips on improving your mortgage application as a first-time home buyer.

3 Home Buyer Mortgage Broker Tips

  1. Take advantage of the home-buyers plan to fund your down-payment.  This program is not technically ONLY for first-time home buyers, but all first-time home buyers are eligible.  Under the plan, you can borrow up to $25,000 from your RRSP for the purchase of an owner-occupied residence.  If you and your spouse are both applying, then you can withdraw $25,000 each. It is a loan, so it has to be paid back over 15 years (or 1/15th of the loan will be added to income for that year).  However, there is no withholding when you withdraw it, it does not have to all be declared as income on any given year, and you don't even have to use all of it for down-payment!  You can use it for any purpose that you need it for. A good mortgage broker, like myself, can help you with some of the finer details and complex situations that often arise from these situations.
  2. Make sure you pay your bills on time. If you have a high balance on your loan, or you have a lot of debt, those also have a significant negative impact on your credit score, but you can get the bills down and there is no record of your high debt levels.  However, when you miss a bill payment, it stays on your credit bureau for 6-7 YEARS.  This not just negatively impacts your credit score, but lenders look at this when assessing risk, and they have been particularly uncompromising and (unreasonable, paranoid, strict...and other words that I cannot put in print) in the last few years.  While you likely do not have to wait 6-7 years to become bankable if you have had gone through a period of bad credit, the less negative credit on the bureau, the better. At least make the minimum required payments and you will go a long way to making yourself appealing to them.
  3. Having no credit is just as bad as having bad credit. Many people feel that not requiring credit should prove your ability to pay your bills and should be good evidence of credit-worthiness.  This is not how mortgage lenders think.  If you currently do not have any credit, then you do not have any documentation that you are an acceptable credit risk, and no matter how strong your income is, you will have difficulty obtaining a prime mortgage approval.  Make sure you have at least 3 different credit facilities in your name.  (Secondary credit cards in a spouses name are not considered acceptable for establishing your credit).

I am excited to launch my home buyer mortgage broker e-book soon, in which I go into much greater detail and give many different ideas to help home buyers prepare for home ownership, but as a mortgage broker in Vancouver, you are welcome to contact me in the meantime to discuss your circumstances and see if there are any options for you.

mortgage broker Vancouver BC
Good news regarding OSFI rule changes
Jeff Evans
No Comments

This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the current guidelines into the new year by up to 120 days provided that I have an application and am able to get a pre-approval in place with a lender for you before January 1.Read More

OSFI B20 mortgage guideline changes 2017 – Part 2
Jeff Evans
No Comments

This is a continuation of the article published here about the OSFI B20 morgage guidline changes for 2017.

If you are familiar with mortgage brokers at all (which you probably aren't) you would know that we also have alternative sources of lending for situations where a mortgage borrower will not qualify with a prime institution.  We have what we call "B" lenders, who have higher rates but more flexible lending criteria, and we have private lenders, which are individuals and corporations who can lend money on on anything that suits them.Read More