Friday, April 11, 2014

What is your Credit Score? How can you improve it?


Your credit score is a number that illustrates your financial health at a specific point in time. It is also an indicator of how consistently you pay off your bills and debts. Your credit score is one of the factors lenders consider when qualifying you for a mortgage. 

Credit scores range from 300 to 900, 300 means you are on financial "life support" and 900, well even Bill Gates doesn't have a 900 credit score. The average Canadian's beacon score ranges from 600 to 830, ideally it is best if your score is above 680 for most mortgage lenders and products.
Also, it is important to know that the score given to you by Equifax when you pull your own credit consumer report is not the same beacon score that a Mortgage Broker will pull when helping you qualify for a mortgage. Although it is still important to pull your Equifax and TransUnion consumer credit score annually to ensure that there are no issues, no fraudulent activity, inaccurate information, or collection items or charges that need to be resolved.


10 Tips to maintain and improve your credit score:

Pay your bills on time! If your credit card due date is the 12th of the month and you pay online, make sure you pay your bill by the 9th or 10th to ensure the payment is processed on time. Setting up an automatic payment plan with your bank is a great solution, so you never miss a payment.

Pay your balance! 
Pay your credit card balance in full each month if you can.

Use your credit lightly! You should never have a balance more than 30-40% of the limit. Even if you are paying off the card in full each month, having a balance greater than 40% of your limit will reduce your credit score.

Never go over your credit card limit. If your balance goes 50 cents over the credit card limit your beacon score will drop.

Minimize your credit inquiries! Do not sign up for credit cards at The Bay cause they are offering you 10% off, or Canadian Tire, or Best Buy, or at sports arenas and airports when credit card companies offer gifts for signing up. Have a Mortgage Broker shop around for you when looking for a mortgage, choose one Mortgage Broker to work with and they will pull your credit bureau and find the best lender, product and rate for your situation.

Never use one credit card to pay off another! Your credit score will be higher if you have multiple credit cards with lower balances than having one credit card or line of credit with a large balance.

Ensure you do not have any judgements or collection items
 on your consumer credit report. If you do, pay them off IMMEDIATELY and keep proof of payment on file. Sometimes parking tickets are blown off your car and you may not be aware that a parking ticket has gone to collections, this can be detrimental to your beacon score.

Do not close accounts because you think they will be removed from your credit bureau. It is important to have credit history, having multiple different trade lines (credit cards, loans, lines of credit) with a minimum limit of $1500 for at least 2 years is very important for having a strong credit score. Pay off your debt and keep the credit cards active, use them a few times a year and pay the balance off in full, this will keep the account active on your bureau and help your overall score. 

Demonstrate that you can be fiscally responsible! Do not borrow too much and pay back what you do borrow on time. Do not open more accounts to increase your available credit or create a better variety of credit, especially if you are just establishing your credit history. Adding a lot of new accounts will look risky and will definitely lower than average age of your accounts. Only open new credit accounts if and when you need them.

When you are shopping for a mortgage, use a MORTGAGE BROKER :) I will protect your credit score by not pulling your credit multiple times as well I will help you consolidate debt, rebuild your credit score and get you back on track.
Equifax can provide you with an online copy of your credit score as well as a credit report — a detailed summary of your credit history, employment history and personal financial information. If you find any errors in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy immediately.

Please contact me if you need any help understanding your credit bureau/score or how to improve your credit.

LAURA MACCORMACK 
CLEVER LENDING Mortgage Broker 
c 778.388.4240 f 604.398.2770 
laura@cleverlending.com
www.cleverlending.com