If you’re trying to enter one of North America’s hottest markets, you need to have your finances in order, be pre-approved for a mortgage, and a strategy for the neighbourhoods you’re targeting.
When you do find a home you like in a market as fast as Toronto’s, you’ll also need to partner with one of the more reliable law firms in downtown Toronto early on in the process. Having them in place and ready to go ensures that you are able to move quickly on a home and still be protected.
But there are times in a competitive market when you have to reapply for a mortgage before you’ve found the right home. The good news is you can make use of that time to improve your credit score, which may result in getting approved for a higher amount and a better rate. So follow the tips below to optimize your credit score until the time is right to buy.
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Keep Old Credit Accounts Open
An old credit account, even if it’s paid off, is an easy way to boost your credit. Having a long history of responsibly managing your debts is known to boost your credit score.
Another recommendation to improve your credit rating is to keep older accounts instead of opening new ones if possible, even if you’re being offered a better interest rate. Opening a new account is basically like starting over. As long as you’re able to manage your account, the higher credit score you get from keeping your old account could mean lower interest rates in the future.
Don’t Apply for Multiple Types of Credit
If you’re ready to shop for a mortgage, make sure you haven’t also applied for a car loan or credit cards recently as well. Too many credit applications can lower your credit score as to the credit bureaus; this could be a signal of desperation for money.
If you are going to shop around for a mortgage, it’s best to wait a while after your last credit application, do your homework before applying for mortgages with different companies and narrow down your choices as much as possible before doing so.
Keep on Top of Your Bills
Missing a single bill or credit payment and having it outstanding for 30 days can be enough to lower your credit rating, as a missed payment stays on your credit report for up to 6 years. Whenever possible, set up automatic withdrawals for your bills to make sure they are paid on time and/or program reminders in your phone to pay the bills you can’t pay automatically and to remind you to check your account(s) before the bills are due to make sure there’s enough money to cover them.
Try Not to Use More Than 30% of Your Credit Limits
It’s not a good idea to carry a balance of more than 30% of your credit limit. The credit bureaus look at your outstanding credit and compare it with your available credit as a factor for determining your credit score. The bigger the gap, the better your score. Having a high credit card balance also means paying more money in interest, money you could be saving for your down payment.