When preparing to buy a home, most people can not make the purchase outright in cash. It is totally normally and acceptable to use a mortgage. As you go through the process of getting pre-approved for a mortgage so that you know what your home budget is, the bank is going to do something very important: a credit check. If you're thinking about buying a home but know your credit score won't be good enough, here are some ways you can improve it:
- Monitor your monthly payments closely! Make sure you are always paying your bills on time, that you are meeting your minimum payments and that you don't skip paying a bill even if it's in dispute. There are helpful apps out there, such as Mint, that can help you keep track of payment deadlines, goals, transactions, budget and more. Take advantage of every available resource to help you track your spending and due dates. Don't let anxiety over a high balance or tight funds to keep you from staying informed.
- Use your credit wisely. With most credit cards having spending incentives these days, such as getting flying points or cash back, people are more tempted than ever to load up their credit cards. You should only ever use 35% of your available credit if you wish to keep your credit score in good standing. Even putting a major purchase on your card that you immediately pay off can affect you. Use cash as much as possible, and don't look at your credit card as a 'credit' card; look at it as a 'debt' card.
- Limit your credit checks. It's normal to seek a credit check, or to require one. However, if you are constantly applying for credit cards, loans, or having potential employers and landlords checking your credit, it puts up a red flag for your bank. This is often an indication that you attempting to live beyond your means or that your urgent need for credit may be risky. Everyone needs their credit checked for various things at times, just don't over do it.
- For more information, visit the Financial Consumer Agency of Canada
Remember: improving your credit can take time, but you do have the power to make things better. The most important thing to do is to stay on top of your monthly bills and payments, to approach the bank when you see any unauthorized expense or charge and to keep your debt to an absolute minimum.
Good luck!
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