Your credit score is one of the most significant factors that lenders consider when determining your mortgage rate. In Edmonton’s competitive real estate market, having a strong credit score can save you thousands of dollars over the life of your mortgage. Here’s how to improve your credit score and secure the best possible mortgage rate.
Why Your Credit Score Matters
Lenders use your credit score to assess your financial reliability. A higher score signals that you’re a low-risk borrower, which can result in:
- Lower mortgage interest rates.
- Better loan terms.
- Higher borrowing limits.
In Canada, credit scores typically range from 300 to 900. A score above 760 is considered excellent, while anything below 600 may limit your mortgage options.
Steps to Improve Your Credit Score
- Check Your Credit Report Regularly
- Obtain your free credit report from Equifax or TransUnion.
- Look for errors, such as incorrect accounts or late payments you didn’t make, and dispute them immediately.
- Pay Your Bills on Time
- Late or missed payments negatively impact your score.
- Set up automatic payments or calendar reminders to ensure you never miss a due date.
- Reduce Your Credit Card Balances
- Aim to keep your credit utilization below 30% of your total available credit.
- For example, if your credit limit is $10,000, try to keep your balance under $3,000.
- Avoid Opening New Credit Accounts
- Each application triggers a “hard inquiry,” which can temporarily lower your score.
- Only apply for credit when absolutely necessary.
- Maintain Older Credit Accounts
- The length of your credit history contributes to your score.
- Keep old accounts open, even if you don’t use them frequently, to benefit from their longevity.
- Diversify Your Credit Mix
- A mix of credit types, like credit cards, car loans, and a line of credit, can positively impact your score.
- However, always ensure you can manage these debts responsibly.
- Settle Outstanding Debts
- Pay off collection accounts or overdue bills as soon as possible.
- Negotiate repayment plans with creditors if necessary.
How Long Does It Take to See Results?
Improving your credit score isn’t an overnight process, but consistent effort can yield noticeable results within a few months. Major improvements may take a year or more, so start early if you plan to buy a home soon.
Benefits of a Better Credit Score for Mortgages in Edmonton
- Lower Monthly Payments: A better rate means smaller payments, leaving more room in your budget.
- More Housing Options: Higher approval odds open up a wider range of home choices.
- Long-Term Savings: Even a 0.5% difference in your interest rate can save you thousands over a 25-year mortgage.
Partner with us at Steven Murdoch Mortgages
Improving your credit score is just one part of securing the best mortgage rate. A knowledgeable mortgage broker can guide you through the process and connect you with lenders who understand your financial goals.
Ready to take the next step in your Edmonton homeownership journey? Contact us today for personalized advice and support.
780.983.5148
info@stevenmurdoch.ca
