Posted in Canadian Mortgage News, Kamloops Mortgage Broker, kamloops mortgage financing, Kelowna Mortgage Broker, Kelowna Mortgage Financing - Lisa Alentejano, Mortgage Broker Kamloops, Mortgage Consultant Kamloops, mortgage financing kamloops, Pre Approval Mortgage, Refinance Your Mortgage, Salmon Arm Mortgage Broker, Vernon Mortgage Broker

Raising your credit score to 740

CREDIT
CREDIT

As mortgage rates tumble, many would-be buyers and refinancers are missing the chance to lock in loans at record lows. The reason? Their credit scores aren’t high enough to qualify for the best rates and in some cases are too low to qualify for any loan at all.

Credit scores are three-digit numbers lenders use to gauge your creditworthiness. Even people with lower scores could get a decent deal, and at the peak of the lending boom it seemed no score was so low that it merited a rejection.

Missing out on what may be once-in-a-generation interest rates is painful enough. But less-than-stellar credit can hurt in other ways. After all, credit information is used:

By insurance companies to evaluate applicants and set premiums.

By landlords to decide who gets apartments.

By employers concerned about higher risk of theft from those with troubled finances.

The good news is that it’s possible to boost your numbers if you have a handle on your finances and you know how credit scores work. Plenty of folks are handling their credit well enough to earn good scores. You can, too. But first you need to recognize that:

You can’t raise your scores if your finances are still in free fall. If you’re unable to pay your bills, you certainly can’t fix your credit. Real credit score repair will have to wait until your financial crisis has been solved and you have enough money to cover your expenses, plus some extra to begin paying down your debts.

You can’t raise your scores if you don’t use credit. Credit scores try to predict how well you’re likely to use credit in the future by how well you’ve used it in the past. So while living a cash-only lifestyle may do wonders for your wallet, it won’t boost your scores — in fact, without continuing use of some type of credit, eventually your credit reports won’t even generate credit scores.

You don’t have to pay credit card interest to achieve great scores. “Using credit” is not the same as “carrying a balance on your credit cards.” Carrying a balance is expensive, bad for your finances and completely unnecessary. Many of us who have achieved 800-plus scores pay off our balances religiously, and we know you can build and keep great credit scores without ever paying a dime of credit card interest.

You can’t expect overnight results. You’re likely to see improvement in your scores within 30 days if you pay down significant chunks of your credit card debt. But otherwise, credit repair takes time, and how much time depends on the many details of your credit reports. If you have serious black marks, such as bankruptcies or foreclosures, you can see significant improvement in your scores as time passes but you may have to wait until those negatives drop off your credit reports before you can join the 700-Plus Club.

Now that you understand the basics, you can use the following techniques to get your scores over 740.

Give your limits a wide berth

Spread out your debt. More than a third of your score depends on how much of your available credit you’re using — your so-called credit utilization. The formula likes to see big gaps between your balances (whether you pay them off each month or not) and your limits, especially on credit cards. (You’re rewarded for paying down installment debt, such as mortgages and auto loans, but your scores improve much more dramatically when you pay down revolving debt such as credit cards.) In short, it’s better to have small balances on several cards than a big balance on one card.

A balance is a balance. You have to worry about your credit utilization ratio even if you pay your balances in full each month. The balance that’s reported to the credit bureaus is typically the one on your last statement, not the balance that’s left over after you pay your bill. So if you charge $9,000 on a $10,000 card, it’s going to look like you’re using 90% of your limit , even though you paid off the balance in full when you got the bill.

Shoot for 10%. The less of your available credit you use, the more it rewards you. Keeping your credit utilization below 30% on your cards is good; getting it below 10% is even better. If you regularly use more, ask for a higher limit, spread your charges out on more than one card or make two payments every month — one just before your monthly statement closing date to lower the balance reported to the credit bureaus and a second one just before the due date to avoid late fees.

Push back against lower limits. Credit card issuers are reducing limits right and left; in fact, one banking analyst estimated that the newly risk-averse companies would slash $2 trillion of the $5 trillion in existing credit limits. This can be awful news for your credit scores, but you can and should try to push back.  If you can’t get the issuer to reverse its decision, move your balance elsewhere.

3 strategies for lowering utilization

Move debt to installment loans. If you’ve got high balances that you can’t pay down quickly, consider transferring the debt to a personal installment loan. The scoring formula treats installment loan balances more kindly than the same debt on credit cards.

Or move debt off your credit reports entirely. You can make debt seem to disappear by paying it off with a loan from a friend, family member or retirement plan, none of which typically show up on your credit reports.

Play the home equity card cautiously. Moving a credit card balance to a home equity loan or line of credit may improve your scores but put you at greater overall financial risk.

Don’t close accounts or let them be closed. Closing accounts can’t help your scores and may hurt them. Yet many issuers these days are slamming shut inactive cards rather than continue to carry these unprofitable accounts. If you’ve got cards you haven’t used in a while, take them out for dinner or a movie, and pay the balance promptly. Better yet, use them to charge a regular expense, such as your electric bill, and arrange for automatic payments.

Apply for credit sparingly. Applications for credit don’t ding your scores as much as some people fear; typically, you lose five points or less. But when every point counts, such as when you’re in the market for a mortgage or a car loan, you don’t want to squander any of your scores. Wait to apply for any other credit until you’ve secured the loan you want.

You can check your own credit scores with Equifax Consumers Canada   or Trans Union Canada  they can send it by mail for free or for a fee you can view it on line.  This will allow you to view your credit report, also check for any discrepancies as well.   

What will you see on the credit report?

A surprising amount of detail, actually. It contains information about every loan you’ve taken out in the last six years — whether you regularly pay on time, how much you owe, what your credit limit is on each account, and a list of authorized credit grantor’s who have accessed your file.

Each of the accounts includes a notation that includes a letter and a number. The letter “R” refers to a revolving debt, while the letter “I” stands for an instalment account. The numbers go from 0 (too new to rate) to 9 (bad debt or placed for collection or bankruptcy.) For a revolving account, an R1 rating is the notation to have. That signifies that you pay your bills within 30 days, or “as agreed.”

Any company that’s thinking of granting you credit or providing you with a service that involves you receiving something before you pay for it (like phone service or a rental apartment) can get a copy of your credit report. Needless to say, they want to see lots of “Paid as agreed” notations in your file. And your credit report has a long history. Information remains on file for six years.

Author- Lisa Alentejano
Author- Lisa Alentejano
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Finance/mortgage industry professional located in the Interior BC First Time Buyer Challenged Credit Second Mortgages Line of Credit Refinance Renewal Lets talk about your financing needs today! Great rates and Great Service!

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