Looking to buy a condo in 2020? Get your credit score on track
If buying a condo is on your list of things to do in 2020, this may be a good time to check your credit score and report. These two pieces of information will play a big role in determining how much mortgage you qualify for and the rate the bank is willing to offer.
Condo buyers will often start the financing process when they find a condo they want to put an offer on. But if your credit score is low, or there is incorrect information in your report, you can be delayed in securing financing. That’s because improving your score and fixing wrong information takes time.
Take a look at your credit score and report now, because you have time to fix and improve your situation. It will set you up to be in the best position to buy a condo when the time comes. It’s also good practice to know your score and most of us could benefit from checking it. A survey from BMO Bank of Montreal shows more than half of Canadians have never checked their credit score.
Credit score and reports
Your credit score is a number between 300 and 900. It is determined from the information that is in your credit report, and it provides lenders a snapshot into how credit worthy you are. The higher the score, the more likely a lender will want to do business with you. The score is the first number lenders will inquire about because it quickly tells them a lot about your financial health.
Your credit report is a list of your financial history going back seven years. It will show what credit cards you own, what debts you have outstanding, if you have paid a bill late, and worse, if you are in arrears on any bill. It will also include all your basic information as well, like your social insurance number and date of birth.
Credit reporting agencies
The two major credit reporting agencies in Canada are TransUnion and Equifax. Every time you request credit, one of the two agencies are supposed to get record of that. But the reports can be flawed as the two companies may have different information about you. Lenders are required to report in only one place. Best practice is to request a score and copy of your report from both agencies. You can make sure the information is up to date and accurate. This is especially true for anyone with a common name, as information that does not belong to you can be inputted on your report by accident.
Determining a good score
The higher your credit score the better. According to TransUnion, 650 is the magic middle number – a score higher than 650 will likely qualify you for a standard loan, while a score lower than 650 will likely make it hard for you to receive new credit. If your score is low, it may be because of some bad information in your report.
How to improve your score
The number one way to improve your score is to pay all your bills on time. This includes your rent and utility bills. As well, don’t apply for unnecessary credit. If you do, you can be seen as a risk to lend to by creditors. Cancel any cards or close account you are no longer using. If you already have a credit card or line of credit, don’t carry a balance of more than 75 per cent of the available limit. Being maxed out all the time on your cards is not seen as a positive. If you can afford to, pay down small loans and close those accounts.
Always knowing where you stand financially will help you better prepare for big purchases such as buying a condo, and avoid any last minute delays due to errors on your credit report.
Start doing this now to see you credit score improve by 2020.
Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.