Improve your chances at getting a Mortgage
In the video Phil explains common mistakes people make with credit, how more credit is sometimes better, why a small limit is a bad thing, how to check your credit without it hurting your credit and what the banks expect for a credit score. Read below for the more detailed version.
Credit Score
The first thing banks or mortgage brokers will look at is your credit score.
Having no credit can negatively affect you. Meaning that if you only have one form of credit (or zero) then it wont look good to the bank. Phil recommends having at least two. This can be a car loan, student loan, credit card, line of credit or anything that will come up when you do a search.
Search your credit! Phil mentions Equifax. I have not tried Equifax, but in the past, I tried one that said 'Free Credit Check' but they forced me to input my credit card. I didn't think much of it until I noticed a monthly fee of around $20. Unfortunately, it took me many months before I noticed and the best they would do was delete the account. So, if any similar site asks for your credit card information to get your free report, don't do it.
I have used Borrowell for free for some time now and I have never paid for it. I am sure there are others that can also work, but this one has been perfect for my family.
I did notice that they offer me $5 if I introduce a friend. This site is free for you, but if you want to buy me a coffee, please use the following link and they will send me a $5 gift card (last time I got an ecard for Starbucks)
Phil also mentions that banks now offer something similar inside their apps/sites. if you prefer you could also see if your bank offers soft checks that would not effect your score by checking.
What is a Good Credit Rate?
So you checked your credit history and score, now what does it mean?
The minimum a bank looks at for a mortgage is a credit score of 600.
A lot of lenders want to see you above 700.
If you are around 600 you are considered a little higher risk so the banks will want to see more savings or a higher income.
Payment History / Credit History
Banks do look at payment history. Make sure you are making your payments ontime. Many services offer automatic payments and bank accounts offer scheduled payments. Use these or pay bills as soon as you get them if paying on time is an issue for you.
Why is a Small Limit a Bad thing?
This is a common misunderstanding that I used to have. I thought that the less credit you had the better, but that is not how the algorithm works. 33% of your score is based on utilization. This means that if you have a credit card for $1000 and you owe $900 on it, your credit score will go down as you have used 90% of your credit. On the other hand if you had a credit card for $9000 and you owed $900 on it you are only using 10%.
Using your credit and creating a good history is ideal, but anything over 50% usage looks bad. Below 30% is best. So, having a higher limit will help you.
In my case I had all my credit cards paid off and only had money on my line of credit owing. This was not a huge line of credit, so I was using probably 80% of it and contacted the bank to try to raise the amount and they also explained that if you are using a high percentage of it and not able to pay it off, they do not want to offer you more. When it comes to the algorithm it doesn't look at all credit you have an average it out, so try not to use over 30% of any of your limits.
Continue to Save!
We joked about getting a Sugar Mama (or Sugar Daddy), but a lot can be said about reducing your expenses or, if you can, increasing your income.
Personally, I would ask yourself how you will feel about your expense a couple years from now? If it will create awesome memories you probably wont regret spending money it, but can you cut out some of the THINGS? Or even better spend less on bad food or things that are bad for you?
If you have any other questions feel free to reach out.
Please visit the following page to get Phil's details (Be sure to tell him that you found him through Derek's video) https://dkeet.ca/guest-speakers.html
If you are looking to buy a property in Edmonton, Sherwood Park, or need advice on the current market contact Derek!
Derek is licensed for residential, commercial, and rural real estate, plus has many years of personal and business experience to be able to understand your needs.
If you are interested in buying or investing in Edmonton or the surrounding areas, click here to set up your own detailed search: https://dkeet.ca/map-search.html
Click here for more information on Derek Keet: https://dkeet.ca/about.html
