REPAIRING YOUR CREDIT SCORE

Sometimes the only thing standing between you and your dream home is a poor credit rating. This can happen for a variety of reasons, but the most important thing is to fix it so you can get on with your life, and pursue your future. The article below gives some tips on how to improve your credit score.

Source: Canadian Real Estate Wealth

1 The easiest and quickest thing a person with poor credit can do to is to quickly resolve items that may be pulling their score down. Check your credit bureau or work with an experienced mortgage professional or credit repair specialist and correct potential errors.

2 Thirty-five per cent of your credit score is determined by your payment history. So automate bill payments for creditor liabilities that are routinely paid late. Never forgo making even the $10 minimum payments.

3 Open a secured credit card with a lender that reports to the credit bureau or get a secured line of credit that will also report to the bureau and keep those payments timely.

4 Pay all outstanding collections or find a reputable credit expert to help you negotiate a settlement on these items — you can get an instant boost to your credit score by 15 points or more.

5 Pay down revolving credit accounts such as unsecured lines of credit and credit cards. Since each lender uses a different minimum payment for mortgage qualifications, the higher the balance outstanding, the higher the minimum payment the mortgage lender must use.

6 Ensure your revolving credit balances are never reported over the limit granted by the creditor. This often happens when you are at or near your limit and the lender charges interest when your next statement is produced, causing the balances to be higher and lowering your balance-to-limit ratio. Since balance-to-limit utilization ratios have a huge impact on one’s overall credit score, an incorrectly reported balance may be artificially pulling one’s score down. Aim to keep your balances at no more than 50% of the creditor limit granted at any given time.

7 Don’t apply for a consolidation loan if you intend to purchase real estate in the near future. While the merits of doing so is admirable when you’re trying to reduce your debt, the higher balance reported relative to the approved limit of the consolidation loan in the first year or two will artificially lower your credit score.

8 Don’t shop for credit during your mortgage application process right through to mortgage funding. Many Alt A or sub-prime mortgage lenders pull a secondary credit bureau before funding and this can result in a decline if your score drops further than where it was at time of application.

9 Build and keep “active” credit. This means use credit cards you are approved for carefully and regularly. This is especially true if you have come out of a bankruptcy, consumer proposal or other emotional event that has caused your credit to decline. Having no “active” credit can be just as harmful from a credit perspective as having bad credit.