Credit score is one of the major players in determining the amount of financing and interest rate you are eligible to receive. Credit history proves to lenders how reliable you are when granted funds. Leading up to your mortgage application, there are six, quite simple steps you can take to help improve your credit rating.
Remember that regardless of a company’s claim to possess the ability to repair your credit score for you, in Canada, this is just not possible. Don’t fall prey to a credit repair scam. Though there are actions you can take to improve your own credit rating, there is no easy way out or fee you can pay to have the slate completely cleaned. Instead, follow the following and improve your credit rating the right way.
Step 1: Attain your Current Credit Score
To know exactly what you are dealing with, you will need a copy of your credit report. This can be attained for a nominal fee by a credit bureau such as Equifax.
Step 2: Review your Report
Go over your credit report item by item and ensure that everything appearing is accurate. Notice an item that has already been repaid or was addressed long ago? You will deal with those next.
Step 3: Correct Inaccuracies
Completing this step will usually involve contacting the credit bureau and proving the error that has been made. To do this, check your bank statements or cashed cheques to provide proof that the payments have indeed been received by the creditor, if such is the case. You may also need to contact the creditor and have them issue a statement that your debt has been cleared; or explain the circumstances, in letter form, as to why the item occurred and is now considered to be documented inaccurately.
Step 4: Repair Negative Information Appearing on your Report
Perhaps six months ago you agreed to a department store credit line, charged one pair of shoes on the account, and forgot entirely about it – until now. Get any nominal payments owing cleared, and request to the creditor with which the debt was incurred to make a note to the credit bureau that the debt has been cleared. Late payments can dock a lot of credit points, even if the payments were for just one small item. Clear the debt, and explain your story to the bureau.
Step 5: Bring Down your Balances
Even applicants with perfect re-payment histories can receive a poor credit score if all of their credit sources are maxed. Try to bring down balances by a minimum of 30 per cent, starting with credit products charging the highest interest rates: namely, credit cards. This could be a lengthy process, but one that will save you largely if it brings your credit score up into a range that sees you granted an improved interest rate.
Step 6: Get Help When Needed
If your debt has amassed to a point that you cannot see over the pile, it may be time to seek professional aid. This could mean debt consolidation, filing a formal proposal to creditors owed, or developing a course of action with a financial planner. Don’t be afraid to ask for advice. Consolidating your debts into one lower rated payment will not only save you funds, but will see you achieve your financial targets with much more speed.