A credit score is a three-digit number based on credit history and financial behaviour. Lenders use it to assess the risk of lending money to an individual. It is crucial in determining loan eligibility, interest rates, and loan terms. A higher credit score indicates that the person is more likely to repay their debts on time, while a lower credit score suggests that they may have a history of missed payments. Your credit score is a vital aspect of your financial health.

Several factors can affect your credit score, including your payment history, credit utilization rate, length of credit history, types of credit accounts, and new credit inquiries.

Your payment history is one of the most significant factors affecting your credit score. Lenders want to see that you make on-time payments consistently. Late payments, missed payments, and defaults can significantly lower your credit score.

Another factor that affects your credit score is your credit utilization rate. This is the amount of credit you use compared to your available credit limit. Lenders prefer to see a credit utilization rate of 30% or lower. If you have high balances on your credit cards, it can hurt your credit score.

The length of your credit history is also an essential factor. Lenders like to see a long and positive credit history. It can hurt your credit score if you are new to credit or have a short credit history.

Finally, new credit inquiries can also affect your credit score. When you apply for credit, the lender will check your credit report, which lowers your score each time someone checks it. Lenders may be concerned that you are trying to live beyond your means if there are too many credit checks or inquiries in your credit report.

There are two main credit bureaus in Canada: Equifax and TransUnion. These private companies store and share information about how you use credit.

Your credit report may contain your history of non-sufficient funds payments, bankruptcy, debts sent to collection agencies, registered items such as car liens, fraud alerts, and identity verification alerts. It will also contain information such as when you opened your account, how much you currently owe, if you have missed payments, if you make your payments on time,  and if you have ever exceeded your credit limit.

Your credit score plays a crucial role in determining your eligibility for a mortgage. A low credit score can make it challenging to secure a mortgage or result in higher interest rates and less favourable terms. On the other hand, a high credit score can increase your chances of getting approved for a mortgage and save you a significant amount of money in the long run. Understanding the components of your credit score and taking steps to improve it before applying for a mortgage is essential.  Learn more about your credit score here.

At Primex Mortgages, we can help you repair your credit score while shopping for a home. We can create a plan to raise your score to appeal to more favourable lenders and get the best rate out there for you.  CLICK HERE to book a call with Trish.

Trish & The Primex Team