Why Your Credit Score Matters When Getting a Mortgage

Why Your Credit Score Matters When Getting a Mortgage
You’ve probably heard a lot about credit scores and their impact on your future financial endeavors. This
number, which defines your credit history and shows lenders how well you’ve stayed on top of your
debts in the past, can save or cost you thousands! It’s kind of amazing to think of how much a three-digit
number can impact the trajectory of your future, isn’t it?
What is a Credit Score?
When it comes to getting a mortgage, your credit score effects your interest rates drastically. The main
function of your credit score is to illustrate to financial institutions (like a mortgage lender) how likely
you are to pay off your debts. If your score is low, you’re not likely to be seen as very reliable. This is
what drives up your rates.
However, if your score is higher, it shows that you’re more reliable in paying back what you owe. Your
rates, as a result, will often decrease. This also helps you save money on mortgage refinance in Toronto.
Consider it like this: Your friend needs to borrow some cash until payday. But you know that they’ve
failed to pay you or others back in the past. How eager are you to give them your money, knowing this?
How to Keep Your Credit Score in Top Shape
The best way to nurture your credit score toward the higher numbers is to always pay back your debts in
a timely fashion. But if you’ve fallen a bit behind, it’s not so easy to stay on top of things. But don’t fret!
Even though it is not a fast process, you can boost your credit score toward a better number-or keep it
on track if you’re already in decent standing.
How can you do this? It’s not always easy, and it can be quite a slow undertaking, but the following
measures will give you a healthier score:
1. Check your credit report! You can request a copy of it to review for any errors. You might be
getting hit by something that someone else did (like in a case of fraud that you weren’t even
aware of). You could be unjustly penalized for “late” payments that were actually on time.
Compare your payment records to what your credit report says. Address any errors that you
see. You can then set up the disputing process with the credit bureau.
2. Pay your bills on time. Deferring payments to a later date is something we often do when other
expenses come up, but this can really dish out a hit to one’s credit score. The best thing that you
can do is to get your bills current, and then keep them that way.
3. Minimize your use of credit cards, and opt for cards with low limits. Credit cards are a common
way to get into financial trouble. This trouble can be avoided if you rarely use them, or if you
don’t have a very long line of credit to use in the first place. Don’t open up numerous lines of
credit just for the sake of building credit. You could end up digging yourself into an even deeper
hole if you’re unable to pay.
Your credit score tells financial institutions a lot about you, and they’ll often be their first impression of
you. We all want to make our best first impressions when we’re seeking out an important service, and
this is no different. Nurturing your credit score, and being aware of what it is and what’s effecting it, will
help you consciously drive your score higher-and your mortgage rates lower.