Best Practices for a healthy credit score

This is truly a special summer for finances during these pandemic times.  There are many attractive offers from banks and lenders and if you are looking to apply for a loan product such as a mortgage, a car loan or even a new credit card, then I have some tips you should consider along the way.  I mention car loans and credit cards as they lead to establishing payment history that would eventually lead to a good or poor credit score that could affect your mortgage application eligibility. 

Keeping your credit limit in check

Leave some breathing room!  Let’s say a homeowner has a line of credit and uses all of the available credit amount to do reasonable upgrades to improve their home, that may not come across all that great.  In essence, this is all within limit and that homeowner may have a solid plan to pay it down monthly.  However, your credit file would show that your limit is MAXED.  Like the young people say; “it’s not a good look” and this “look” is the party that is reviewing your credit application.  If you can show unused credit balance, it could show you have restraint as you have elected not to max out.  From time to time, your credit card provider may even offer you a credit limit increase offer.  It could be a good idea to accept those only if you have the restraint and willpower not to max out.  The fact that a credit card company is rewarding you with a complimentary credit limit increase can be a positive for the future - Now that’s a “good look”.

Divide and Conquer

Many people have their “go to” credit card as it may offer benefits such as travel points or cash rewards.  This maybe good for the spender as they can view their transactions in one statement, however when qualifying for future credit it may enhance your score when your credit history shows that multiple credit cards were used along the way and the credit balances were paid in time.  In this case, if you have a second credit card, you may want to use it once or twice a month just to build the frequency.  For example, I have setup some membership fees that are billed to me automatically for my secondary credit card.  These charges may be under $100 per month but I continue to support my secondary card activity/frequency which would lead to a healthy look for any future credit review.

Review your credit report

Have you ever looked at our personal information on a credit history report?  This information is available from the likes of Equifax Canada.  You can contact them directly or work with a mortgage broker to speed up the process for access and translation of the report.  When planning for a home purchase and a mortgage application, this review at the start of the process is recommended as a part of smart planning.  This knowledge and any related fixes will eventually to lead to building a custom mortgage solution to fit your lifestyle.

If you are planning a new home purchase this summer and increasing your chances for a mortgage qualification, then let’s connect to explore the best path to approval!

Enjoy,

Sukh Sangha