8 tips to increase your credit score and get the best mortgage rates
There are certain tips to increase your credit score and get best mortgage rates. Read eight helpful finance tips to get a cheaper mortgage rates in Canada.Here are rules for raising your bank prestige and your credit score.
Use your credit card payments to increase your credit scoreThe question often is, how to use credit cards to improve your credit score and our financial habits say a lot about the way we choose to live our lives. The best way is to use no more than 30% of your credit limit, and never to max out on your limit. Using your maximum credit limit is a bad sign for banks. They always prefer offering you a loan or additional credit when you do not actually need it. By staying financially viable, with remaining credit on your cards, you show that you are not desperate for a loan or credit, thereby increasing your chances of accessing money in the future.
Raise your credit card limitImagine your credit card has a limit of $1000 and you max it out regularly. Ask your bank to raise your limit to $2000. By continuing to use only $1000 of credit per month, you are using just 50% of your credit. In this example, the best approach is to request a raise of your credit limit to $3500, so that you need to use only 30% of your credit limit to borrow $1000 per month. Perfect! If you are unable keep your credit card spending to one-third of your credit limit, do not request an increase in your limit!
Make only a few payments with your credit card for getting the best mortgage rates.A bank system works through debts, therefore banks love credit card users. But in order to increase your credit score for your mortgage, you have to show the bank you don’t actually need a credit card. Therefore, use it at least once and no more than three to five times per month. Even if you are using cash back credit cards, it is better to make large purchases. Remember, every purchase shows up in your credit report.
Regular payments towards your credit card debtsAlways pay your credit card debts on time. If something unexpected happens, you must pay at least the minimum payment! Every late payment lowers your score by up to 20 points. Tip: Set up automatic withdrawals to pay your credit card debts and pay it 5-7 days before the due date. The more often you pay your bills on time, the better your credit card score.
How many credits cards should I have?As few as possible, and at least one. This question is a little bit tricky. One part ofyour mortgage score rating is based on your credit history, i.e. how long you have had your credit cards. The longer you have had one, the better it is for your score. (Check out: Details and what is a credit score) Also, it means if you cancel an old credit card it reduces your score. Therefore, unless an old credit card costs you money, do not cancel it. Use it maybe 1-2 times a year and stay below 30% of the card’s credit limit. When you apply for a new card, it will also at first reduce your score. Keep in mind that some credit cards offer benefits that outweigh the advantages of your current credit score. In the long-term, keep the number of credit cards you own low.
Get small loans to degrease your mortgage quoteIt sounds counter-productive, yet loans can also help to raise your score, as it shows your bank that you can responsibly manage repayment, e.g. as with car loans, provided you always make your payments on time and the total amount of your loan is within your financial means. Remember, only use an instalment loan if “you don’t really need it.”
How to behave when I get divorcedIf you get divorced, be sure to separate your accounts. If you have credit cards together, separate your accounts so you can be sure you alone are responsible for your score.
Use a mortgage comparison calculatorLast but not least to get the best mortgage rates compare the market. The easiest way is to use our mortgage calculator of icompare.ca.