Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account.

What Is A Credit Report?

A credit report is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. When you borrow money or make a payment on a loan or credit card, the lender reports the information to these two agencies. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. The accumulation of all of this information is called your credit report.

Information on your credit report varies based on your creditors and what they have reported about you. Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits reflect the way in which we choose to live our lives.

What is A Good Credit Score?

A credit score, or beacon score, is a number that gives mortgage lenders an idea of your lending risk. Credit scores range from 300 to 900, the higher your credit score the better.  670 is having good credit, whereas Canadians scoring 740 and over can boast of having a great credit score.  The mortgage products and interest rates that you will qualify for are often determined by your credit score.

Conclusion

One thing that many people do not know is that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy and go through it with you to verify that all of the information is true and correct. The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

Qualifying for a mortgage can be a daunting task. Here are some things that can make it easier.

Get Pre-Approved

Having your mortgage pre-approved is an important step in the process and benefits you in three ways:

Pre-approval helps verify your budget and allows your real estate agent to find the best home in your price range. Quick Tip: Don’t forget about the closing costs! These range from 1 to 4% of the purchase price and should be factored into your budget.

Pre-approval guarantees the rate offered and locks it in for up to 120 days. This protects you from any increases in interest rates while you are shopping (phew!). Make sure to ask exactly how long your pre-approval is good for!

Pre-approval lets the seller know that securing financing should not be an issue, which is beneficial in competitive markets!

Keep in mind, this is not the same as final mortgage financing approval. However, it can be a very helpful step in the process of getting your final approval by helping you work within your budget.

Use the My Mortgage Toolbox app to help you get pre-qualified as part of your pre-approval – right from your mobile phone! In addition, this tool can help you calculate your closing costs and even your potential monthly mortgage payments.

Maintain Your Credit

If you are currently looking at homes or thinking about looking at homes, it is vital to maintain your credit throughout the mortgage process. Continue to pay your bills on time, refrain from applying for new credit, closing off credit accounts, or committing to any other large purchases (i.e. new car). Secondly, avoid pulling additional credit reports once you have been pre-approved. Furthermore, keep any credit card balances below 70% of the limit to help skyrocket your score.

Utilize Your RRSPs

The Home Buyer’s Plan allows you to utilize up to $35,000 from your RRSP and put it towards a down payment on a new home, which you can repay over a 15-year period. You must be a first-time home buyer to qualify.

Take Advantage of Government Programs

There are various government programs in place that provide some financial relief in the form of rebates and tax refunds, including:

First-Time Home Buyer (FTHB) Tax Credit: First-time homeowners would get a credit of $1,500 if they qualify.

First-Time Home Buyer Incentive: The government will cover 5% of the purchase price on a resale home or up to 10% on a newly constructed home if you qualify. Learn more.

GST/HST New Housing Rebate: You may qualify for a rebate for some of the GST or HST paid on the purchase price or cost of building your new house.

There are additional programs and support available depending on your province. This includes land transfer and property transfer rebates, first-time homebuyer tax credits, homeownership support programs, and more.

Welcome