Mortgage companies use three major credit bureaus to assess a buyer’s rating, but in Canada, there are two; Equifax and TransUnion. Credit bureaus collect data about your credit that your lender reports. That is how your credit score is determined.
It ranges from 300-850. if you have 650 points and higher, it is easier to secure a loan. However, you may have a credit crisis if you have 620 points and below. When you have a low credit score, that’s okay. It happens. Find a credit company that has a good reputation. A bad credit repair company can only put you in a tighter spot.
Fixing it is complex, and you may postpone your dream home. But that’s okay than paying a little high interest.
Get your free credit report; you are granted one once every 12 months to bureaus and evaluate why you have a low credit score because there are reasons why you have a low credit score. Let’s talk about them one by one.
Reasons why your credit score is low:
1. Bankruptcy
– if you declare bankruptcy, it can lower your credit score by up to 200 points.
2. Charge-offs
– charge-offs are reported on your credit when the creditor has given up trying to collect from you and ends up writing off the amount you owe as bad credit. It is also one of the reasons why you’re denied credit.
3. Late payments
– Your payment history takes up to 35% of your credit score which is one of the highest factors that affects your credit score. So you don’t want to miss your payments if you don’t want a significant deduction on your score.
4. Defaulting on Loans
– If you missed one payment and have yet to pay at the end of the month, the account is marked as default.
5. Reporting mistakes
– sometimes, lenders make mistakes in reporting to bureaus which, unfortunately, affects our score. You can always dispute errors, and they can erase them on your credit report as long as it’s incorrect information.
If you have a low credit score but want to purchase a home. There are ways to fix it first. And get the best deals in the market. You can also consult a credit specialist near me if you don’t know what to do or where to start. But let’s try fixing it ourselves first.
Ways to rebuild your credit score:
1. Make payments on time.
– Making your payments on time can significantly affect your credit score. So make sure to pay your debts on time and never miss them. Paying on time has the biggest on your credit score.
2. Use credit wisely.
– If possible, use only 30% of your credit limit. Using only this portion of your credit limit can help boost your credit score.
3. Increase the length of your credit history.
– the older your credit, the higher its score. New credit doesn’t do much to your credit score. Transferring your balance from an old account to a new one is still considered new credit.
4. Limit hard inquiries
– hard inquiries occur when lenders request a review of your credit report. And it happens when you apply for a new credit, that is why you may want to avoid applying for multiple unnecessary credit accounts.
5. Use different types of credit
– If you only have one credit account. It will slow down the increase of your credit score. Use different credit products like credit cards, car loans, or a line of credit.
6. Become an authorized user
– Ask for help from a family member or friends to be their authorized user. When you become their authorized user, they will be responsible for payments, and their good credit score can also boost yours. Just make sure to pay your ends and keep their trust.
7. Consider a secured credit card
– a secured credit card is like your traditional credit card. The only difference is that you have to put money in your account upon opening, which will serve as your credit limit. This will help boost your credit score because you don’t have debts to pay and use your card for purchases.
These are some ways to rebuild your credit. However, you should be consistent and responsible if you’re eager to fix your credit and get your dream house.
In conclusion:
Purchasing a house is the biggest achievement and investment one can accomplish. If you have bad credit, it can be a hindrance. But don’t let it get in the way, bad credit can happen and the only way to solve it is to rebuild it and get the best home loan deals available in the market.
Consult a professional credit repair company like us, and we will help you with your troubles. If you are new to this and want to fix your credit, this is one of the options you can do. We will accommodate your questions and do our best to satisfy your needs.
