Homebuying 101: You need good credit, here are some ways to improve a bad credit score

Here is a simple truth: if you want the lowest mortgage rate in Canada you must have good credit.  So what happens when you run your credit score and it turns out that it isn’t as good as you had thought?  First of all you should check to make sure that the information in the credit report is correct.  If it turns out that everything is right, you need to start working on improving your score.  Here are some basic tips on how to do that.
  1. Always (and I mean always not most of the time!) pay your bills on time.  Did you know that some cell phone companies may actually report your late payment to credit- reporting agencies?  So make sure you keep on top of monthly payments.
  2. Try to pay ALL of the balance of your bills by the due date.  If that isn’t possible then pay at least the minimum.
  3. Try to pay off your debts as quickly as possible.
  4. DO NOT go over the credit limit on your card.  Try to keep your balance well below the limit (some suggest that keeping credit card balances from 4% to 12% is ideal).  Remember, high credit balances = lower credit score.
  5. DO NOT apply for credit at a bunch of places.  Reduce the number of applications you make because if too many lenders ask about your credit in a short period of time it may have a negative effect on your score.  Also be aware that your score does not change when you ask for information about your own credit.
  6. Have a credit history.  Your score can actually be low by not having a history of borrowing and repaying money; to get a score you need to prove that you are responsible with credit.
  7. Pay off any outstanding debts that you have in collections immediately.
  8. Some people are tempted to hire a company to help in re-establishing credit.  The Office of Consumer Affairs recommends that you beware of these companies, “Their ability to change the information that appears in your credit file is no different than anyone else’s.  Only your creditors are able to alter this information; therefore you do  not need to pay a third party to obtain, discuss, review or make changes to your credit report”.  In short, there are no loopholes or laws that credit repair companies can use to get correct information off of your credit report.

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