Improving your credit score before applying for a mortgage is crucial in securing favourable terms and interest rates on your home loan. Your credit score is a key indicator of your financial health and creditworthiness to lenders. A higher credit score not only increases your chances of mortgage approval but also qualifies you for better loan terms, potentially saving you thousands of dollars over the life of your mortgage. As a leading provider of lending solutions, PHL Capital emphasizes the impact a higher credit score can have on your overall borrowing experience.
Learn some tips for qualifying for a mortgage loan.
Start by obtaining a copy of your credit report from each major credit bureau. Review your reports carefully to identify any errors or inaccuracies that could be dragging down your credit score. Common issues to look out for include incorrect account information, late payments, or accounts that do not belong to you. Dispute any errors you find with the credit bureaus to have them corrected, which can help improve your credit score.
Payment history is one of the most significant factors influencing your credit score. Make it a priority to pay all your bills on time, including credit cards, loans, and utility bills. Late payments can significantly impact your credit score, so strive to consistently make timely payments to improve your creditworthiness in the eyes of lenders.
High credit card balances relative to your limits can harm your credit score, even if you make your payments on time. Aim to keep your credit card balances below 30% of your available credit limit. Paying down your credit card balances can help lower your credit utilization ratio, which is beneficial for your credit score.
While it may be tempting to open new credit accounts, such as credit cards or personal loans, refrain from doing so in the months leading up to your mortgage application. Each new credit inquiry can temporarily lower your credit score, and opening new accounts can reduce the average age of your credit history, which may negatively impact your credit score.
Closing old credit accounts can shorten your credit history and reduce the overall available credit, negatively affecting your credit score. Instead of closing old accounts, consider keeping them open and using them occasionally to maintain a positive credit history; however, make sure to keep track of any annual fees associated with these accounts and weigh the cost against the potential benefit to your credit score.
If you are struggling to improve your credit score independently, consider seeking assistance from a reputable credit counselling agency. A credit counsellor can help you develop a personalized plan to address any credit issues and improve your credit score. They can also provide valuable advice on managing debt and budgeting effectively, which can contribute to long-term financial health.
Feel free to contact us at 604-579-0847 with any questions about mortgage financing. Our dedicated team is here to address your concerns and provide the assistance you need.