The global pandemic has caused unforeseen financial turmoil for many Canadians. We have all been staying at home and, many of us have experienced layoffs and pay cuts. If you are interested in purchasing a home this year, it is especially wise to spend some time focusing on maintaining and improving your credit score. Recent CMHC mortgage rule changes make maintaining good credit vital when seeking a mortgage for your future home. We recommend the following five tips to keep your credit score high this year.
Know Your Credit Score
The first necessary step to improve or maintain your credit score is to learn where your score currently stands. Requesting your credit report will not impact your score negatively and is only visible to you. Once you know where you fall on the spectrum of good vs bad credit, you can determine what changes are necessary to improve or maintain your current credit score.
Take Control of Your Debt
Create a detailed list of all of your current debts. The coronavirus-caused financial crisis may allow you to set up payment plans, get a reduction on interest rates, or even defer payments to provide you with relief on your credit cards, loans, etc. Take advantage of the aid and stimulus packages created and offered by the Canadian government. Discover what programs and services you may qualify for and apply for them.
Eliminate Unnecessary Spending
You may already have a monthly budget in place but seek out opportunities to eliminate unnecessary spending. Go through your monthly expenditures and take note of areas where you can improve spending habits and gain financial discipline. Avoid going over your credit limit to prevent lowering your credit score.
Make Timely Minimum Payments
Always pay your bills on time. If you are not able to pay your bills in full, plan to make minimum payments on everything to prevent credit hits when reported for late payments. Do not ever skip payments entirely, even if you disagree with a bill.
Use Credit Mix to Your Advantage
Use multiple types of credit. Having only one form of credit product (eg., credit card) can reduce your credit score. Using a mixture of different credit products may improve your score as long as you can pay back any money borrowed. Take caution if you frequently use the majority of your available credit. Using the majority of your available credit allows lenders to view you as a considerable risk, even if you pay your balance in full and on time. It is advisable to use no more than 35% of your available credit. Closing a credit account can also hurt your credit score. Consider keeping an older account open even if you don’t require it.
We understand that many people are experiencing some form of financial stress during this uncertain time. We want you to feel confident about your ability to improve your score and acquire a mortgage this year. Our HW Advantage team can advise you of your options, ensure you get the best rates based on your credit score, and help you make informed decisions.
Let’s get started! Contact us by filling out the form here or by calling us at 905-541-6961.