What is a credit score?
A credit score is number between 300-900 given to you based on the repayment history of your credit facilities, such as credit cards, lines of credit and auto loans. It represents a judgements of the risk you pose to money lenders at a specific point in time, the higher the score the less risk you pose.
What does it mean for your mortgage?
Your score is one factor which the lender uses in order to evaluate the strength of a mortgage application. Along with income qualification standards, credit score will determine whether or not you will be approved for the mortgage and at which rate class.
What’s a good score?
There is no standard of a good score, as every lender is different. However, a score of 650 and above is generally universally accepted and preferred by all lenders.
How to improve your credit score?
Improving your credit score is an important factor in getting a great mortgage. The steps that you need to take to increase your credit score can be easy. These include:
Always pay your bills on time - bill payment is a large factor in your score. Late payments can have a negative effect on your score.
Always pay your bills in full - similar to late payments, minimum payments can also have a negative effect on your score.
Don't go over the credit limit on your credit card - always try to keep your balance well below your credit limit.
Lower your credit utilization ratio - this ratio compares the amount of credit you are currently using vs. your credit limit. A low ratio is preferable as it means that you are using less credit.
Don’t keep too many credit cards - the more cards you have can often lead to having negative effects on your score. So only keep the cards you need.
Pay off any debts quickly