How does your credit score affect you?
How Does Your Credit Score Affect Your Chances of Getting a Home?
Everyone who has tried to own a home knows just how important it is to get a perfect or near perfect credit score in order for them to increase their chances of getting that home. Before reaching the decision to grant you mortgage loan or decline your request, lenders in Canada consider your credit score to determine whether or not you are a good candidate for the loan.
In simple terms, your credit score is basically the measure of your financial status or health and is used to determine the level of risk the lender would be taking by lending you money. Credit scores are usually within the range of 300 and 900. Above 700 credit scores prove you have a good grasp on your credit and your management is dependable. This is going to give the lender the confidence to allow you borrow money.
Where your credit score is lower, it shows you cannot be trusted with managing your credit. This makes you more of a risk to a potential lender and implies that you could be asked to pay a higher mortgage rate.
Credit scores are built and tracked using information delivered to the credit reporting agencies which are more often referred to as credit bureaus. This information is often delivered to these credit bureaus by the companies that lend money to you or issue your credit cards. These companies could be banks, retailers, credit unions and other such financial institutions.
In Canada, there are two such credit reporting agencies – Equifax Canada and TransUnion – and they will deliver a free copy of your credit report to you annually. Also, they give you the opportunity to check up on your credit score any other time for a minor fee. In order to ensure there are no mistakes on your credit report, ensure to check it regularly.
Before you buy a home, or look at homes for sale in Cornwall, Ontario here are some factors that influence your credit score
Credit scores are measured or calculated based on the relative proprietary formulas of the different credit-reporting agencies. For the most part, credit scores are calculated using the following factors;
Previous Payment History – If you have missed payments in the past or have overdue accounts or bankruptcies to your name, your credit score is likely going to get lower.
Credit History – Depending on how long you’ve had your credit accounts open, you credit score could be better or worse. The longer your account has been open, the better for you.
These and more would determine how your credit score performs – whether good or bad – and would eventually determine your chances of getting mortgage loan to buy your dream home in no time.
How Does Your Credit Score Affect Your Mortgage?
Depending on the lender, your credit score could determine how much mortgage rate you would be required to pay for. This means, where your credit score is low, for example, your mortgage rate would definitely be higher than when your credit score is higher.
This is why it is advisable to keep your credit score in order by monitoring your expenses from time to time to ensure that things are in place. Also, it is important to check that your credit score is in right order from time to time even before you need the report.