We work with lots of first time buyers and people just starting to think about buying a home. Along with many other factors that make up the purchase of a home, financing (the funds you are able to borrow from lenders) is a significant part.

Your credit score is one of the biggest markers lenders will look at, and it’s worrisome as realtors when so many people are confused as to how credit scores work and how to maintain a good score! In an effort to clear up the confusion, let’s review three easy starting points to getting you that great score:

 

 

1. You actually need to have a little debt! 

 

We know this seems contradictory and totally backwards, but you need to have at least a few credit lines that act as proof of your ability to pay off monthly debt consistently. Having no debt is definitely still a good thing, but it can be even better to go into a little debt and demonstrate how you pay it off because it gives lenders the confidence in you to loan you funds and trust that they’ll be paid back. 

Examples include: loans, credit cards, lines of credit, or even your phone bill! If you don't have any of these pieces in play, you can easily sign up for a low limit credit card. All you have to do is use it once and a month and pay it in full for a regular period of time.

 

 

2. Do not be late! 

 

This might be the key piece of the puzzle. No matter what you do, make your payments on time and in full. Being a day late on your cell phone bill might not seem like an issue, but that gets reported to the credit bureau and it can affect your score in a bad way! We set our banking to auto-pay our cell phone bills–believe it or not, we’ve been there and done that...lesson learned.

 

 

3. Never approach the limit!

 

If you’re one of those people that often toe the line with your credit card or line of credit, just stop now. If you want to reach your home buying goals, or really any financial goal, you have to start keeping your balance at around 50% or less than your limit allows. Part of having debt is showing you have enough self-control not to go blow it all every month on “things”.

Okay, so now that we’ve made you stop and smell the dollars, we want to make sure you know it’s not just us that have your best interests in mind! Your score can change quickly so start making small mental notes to yourself every time you pull out your wallet. Focus on what that purchase could ripple into, this kind of attention will most certainly pay off in the long run!

 

Here are some great resources that you should delve into:

Government of Canada: Improving Your Credit Score

TransUnion: How To Improve Credit Score

Equifax: How To Improve Your Credit Worthiness

Find Me A Mortgage: A List of Canada’s Key Financial Bodies