As of October 15, 2008, 600 is the minimum credit score for insured mortgages. That means you'll need at least a 600 score to qualify for mortgages with less than a 20% down payment and perhaps higher if you are self employed or if you are looking to invest in rental properties.
If your score is below 600, lenders refer to you as a "B" client. 1 out of 5 Canadians are "B" clients. There are mortgages available for "B" clients, however you will likely need a larger down payment and may pay higher interest rates.
Whether you have great credit or need to fix your credit, there's never been a better time than now.
Here is how you can improve credit:
1. Payment history. A single late payment can drop your credit score 15-20 points.
Advice: Make your payments on time or if need be, ask the creditor for a grace period
2. Current debt. This includes how much you currently owe compared to your credit limit, how many creditors you owe money to and how much you could owe if you maxed all your available credit.
Advice: Don't max out your credit. Keep credit to 30-50% or less of available credit limit. Ask for a credit limit increase if you need to make sure you aren't maxing things out
3. Age of Accounts. The longer your accounts have been open the better.
Advice: Try to get three different credit accounts over one year old. Also make sure your credit shows up on your credit report. Examples of credit that may not show up are shared cards (under one person's name). Examples of bills that aren't included in your credit score are Utility bills, tax bills, cell phone bills...
4. Type of Credit. Bank loans, credit cards, revolving credit - these are the types that show up on credit reports
5. Credit Inquiries. Numerous credit checks is not a good thing over a period of 12 months.
Advice: This is a big benefit of mortgage brokers, who only pull your credit once for multiple lenders. Be careful when you give your SIN out. Some places will check your credit without asking!
And finally, the TOP credit score killers are:
- Bankruptcies and Judgements
- Payments over 30 days late
- Maxing out credit cards
- Seeking too much credit in a short period of time (e.g., applying for 4 credit cards in one month)
Start your 2014 off right. Know your credit score (you can check yours with Equifax in Canada) and manage it carefully.
We are also here to help. We've counseled many clients over the years, to help them achieve great credit. There's never been a better time!
