Your Credit Score and Mortgage Approval Process in Canada

One of the most important things lenders consider while approving a mortgage loan is the credit score of the candidate. If you are looking forward to connecting to a Richmond Hill mortgage broker anytime soon for a mortgage loan, you need to know how your credit score plays a crucial role in the process. Your credit score identifies with your financial health and shows banks or lenders their level of risk on lending you the amount of money proposed for a loan.

Typically, your credit score is number ranging from 200 to 900. A good credit score is represented by a number above 700. It means you are eligible to apply to borrow any loan from banks or lenders as per your requirement. It suggests that you are good at maintaining your credit successfully and a lender will possibly feel secure and comfortable in letting you borrow money at a nominal mortgage rate. However, a lower credit score is a sign of mismanagement of your credit, which suggests the lender of the risks in lending you money. With a lower credit score, you will have to pay a higher interest rate for the mortgage loan amount.

There are other factors that contribute to affecting your mortgage approval due to your credit score. We have discussed everything in this blog, including the ways to improve your credit score and how it will be affected on your loan.

Your Credit Score and Mortgage Approval

If you are not much familiar with the mortgage approval process and its connection with your credit score, this blog is a must-read for you. Your credit score is tracked or developed based on the information provided to the credit-reporting agencies by the companies lending you money or issuing credit cards for you, such as retailers, banks, credit unions, etc.

In Canada, there are two popular credit-reporting agencies — TransUnion and Equifax Canada. You can request them for a free copy of your credit score for a minimum fee. It is advisable to check your credit score annually and ensure correcting any mistakes noticed.

Factors influencing your credit score

Credit utilization: the percentage of the debt amount of your available credit affects your score. You should not use more than 35% of the available credit.

Your payment history: late or missed payments, bankruptcies, overdue accounts, and any written off debts will get you a lower credit score.

New credit requests: How often and how recently you have applied for new credit.

Credit history: how long have your accounts been open.

Types of credit: having a mixed credit is best, such as auto loan, credit card, etc.

Effect of your credit score on the mortgage

Before connecting to a mortgage broker in Richmond Hill for a loan to buy a house, you need to understand How your credit score can make an impact on the process. Because it is an important factor whether your home buying process will be in progress or you will face more hassle. It decides which lender can give you the mortgage loan and what will be your interest rate on it. With a credit score above 700, you can get a mortgage loan approved by the prime lenders in the area.

Having a credit score between 600 and 700 can also be workable if the rest of your application is strong. For a credit score lower than 600, you might not get a mortgage approved at all or at higher interest rates even you hire an established mortgage specialist. So, it is always better to maintain your credit score to avoid such cases. Read on to know how?

Ways to improve your credit score

By now, you know it clearly that your credit score plays a significant role in getting your mortgage approved. Most of the banks or lender can reject your application only for this reason. So, how can you maintain a credit score and avoid rejection of your application? We have got you the answer. Just follow some tips, such as:

• Do not have a huge amount of unpaid debt
• Pay your utility and other bills on time
• Always review a copy of your credit score to report any signs of identity theft or other mistakes
• Do not apply for a lot of new credit within a short period
• Do not use more than 30–35% of your available credit (or credit card limit).
• Consider having a secured credit card, if it is your first.

In a Nutshell

We hope now you know how to deal with a Richmond Hill mortgage broker when it comes to a discussion of your credit score. All you need to do is understand the importance of credit score in the process of getting your application approved and ways to maintain a good CS (credit score).