Repairing Your Credit Score
Your mortgage rate (plus most other credit opportunities) will be priced in-part based on your personal credit score. You want to achieve the highest score you’re able to before making any credit applications.
It’s impossible to instantly repair a credit score, it takes some time … so the time to start repairing your credit is today … before you need it.
1. First step, review your official credit report at equifax.ca. Don’t use the freebies as they are not accurate. Go through each trade-line and check for errors, negative reporting, and ensure all is correct.
2. If you find a negative report, fervently dispute it. Do your best to have derogatory marks removed because they drag down your overall score. Once you initiate a dispute, the credit bureaus will investigate and report the resolution. This will take time (several weeks at least).
3. Pay down debt. Decrease the amount of credit used will increase your credit score as your credit utilization ratio (the ratio of credit used against credit limit) will improve.
4. Increase your credit limits. Credit utilization greatly effects your overall score. If you cannot pay down the credit used to less than 70% of the limit, then increase the credit limit which will automatically improve your ratio (but don’t use the extra credit).
5. Open up a new account. Further to the above, if you open a new account (without any new debt) it will also better your credit utilization ratio.
6. Keep all your trade-lines active. Your credit history age matters, even if you do not use those cards, keep them active as your overall history plays a part in your score. Tip – make sure to check on balances of rarely used cards, those pesky annual fees tend to cause issues when a person doesn’t check the statement often when not using them. I often see this being a negative report on a bureau.
7. This should go without saying, pay every bill on time every month, even if only the minimum payment. Even as little as one late payment hurts your score.
If your credit score has been hit hard and the above points are still steps away, your plan should be:
1. First step, review your official credit report at equifax.ca. Don’t use the freebies as they are not accurate. Go through each trade- line and check for errors, negative reporting, and ensure all is correct.
2. Rebuild credit with a secured credit card. A secured credit card is like an unsecured credit card, in that you’ll have access to credit and your payment information will get reported to the credit bureau each month. But you will need to provide an upfront cash security deposit for the credit grantor to take a chance on you. This deposit assures the creditor that you will pay back the money.
3. Create new financial habits to and continue to make payments on time, your credit score will thank you!
Candace Perko
Mortgage Broker
Countryside Financial
www.countrysidefinancial.ca
