A high credit score is your ticket to lower interest rates. The higher your score, the less interest you’ll pay on your home loan. If your credit score has room for improvement, there are some quick ways to quickly build your score to ensure you qualify for a lower interest rate. Read on to learn how.
What Credit Score Do I Need For A Mortgage?
Mortgage lenders typically require borrowers to have a credit score of at least 680 to qualify for a home loan. The higher, the better. Some mortgage providers may approve your mortgage application if your score is between 600 and 680, though it’s highly likely that you’ll be charged a higher interest rate.
How to Quickly Build Your Credit Score in Canada
Pay your credit card balances strategically
A way to build up your credit is to pay down your credit card balance by the due date and keep your outstanding balance low. You can pay in one lump sum just before your credit card bill is due or make several smaller payments throughout the month.
Ideally, your credit utilization ratio should be no higher than 30%. For instance, if you have a $5,000 credit limit, keep your balance below $1,500 ($5,000 x 30%).
Dispute credit report errors
An error on your credit report could negatively impact your credit scores. As such, it’s important to regularly review your credit report for any mistakes and have them rectified. Disputing and removing these errors may improve your credit.
Use a secured credit card
A secured credit card works like a regular credit card except it’s backed by a cash deposit, which also acts as your credit limit. As you use your secured credit card and make payments, you’ll be building your payment history. The creditor reports your payments to the credit bureaus, so each timely payment you make can help boost your scores.
Get credit for rent and utility payments
Timely rent and utility payments can help boost your credit scores if your landlord and service companies report these payments to the credit bureaus.
Add to your credit mix
Multiple credit accounts in good standing can help your credit score. Consider taking out a new type of loan or credit product you don’t already have, and be sure to make timely payments.
How Long Will it Take to Increase Your Credit Score By 100 Points?
It takes anywhere from 30 to 90 days for your credit score, according to the Financial Consumer Agency of Canada. Depending on how low your credit score currently is and how much effort you put into improving your credit profile, it’s possible to boost your score by 100 points within this time frame.
If your credit score is lagging, take some time to give it a boost. Pay all your bills on time, take out a secured credit card, and add new credit to help quickly build credit before applying for a mortgage. Consider assessing your debt and finances for a better idea of how it’s affecting your credit.
