How to Rebuild your Credit to Get Approved for a Mortgage

Have you been told you can't get a mortgage because of past credit issues? Or maybe you haven't even tried to apply for a mortgage because you know you have bad credit?

For many Canadians, understanding their credit and credit report feels like a daunting task so our team breaks down some things that you might not know are wrecking your credit and also some quick ways to rebuild credit after a past credit blemish.

To start here are some things that you might not know are ruining your credit:

1. Late Payments

   Whether it's a phone account, tv provider, or credit card, many companies report to the credit bureau on a monthly basis and will report a late payment. A late payment can drop your score roughly 5-10 points and can make it more difficult to get your mortgage approved as it shows lenders a history of unreliability.

2. Collections

   A collection reporting can drop your credit 50-100 points. If it is an error it's important to contact either Equifax or Transunion to get that removed. If the collection is accurate, to avoid any further credit damage, it's important to get it paid ASAP. Many collection agencies are willing to negotiate so you can try to make a settlement with them for a lower payment amount.

3. Credit Pulls

   A lot of companies use a credit score to determine how responsible a person is. Although this can be a helpful tool, each credit pull can lower your score 5-15 points. We understand that some are necessary however try to avoid unnecessary or excess pulls.

If you want to rebuild credit here are some ways to build credit fast:

1. Manage Utilization

   If any revolving accounts (line of credit, credit cards) report with over 30% of the total limit used this can slowly drop your score. If possible pay all accounts below this 30% amount and watch your score grow. For example, if you have a credit card with a $10,000 limit and it reports with a balance of $5400 that's 54% utilization (5400/10,000=.54 x100) and will lower your score. Whereas if that same credit card has a balance of $2300 that's 23% utilization and will not negatively affect your credit.

2. Have Accounts Reporting

   When trying to get a mortgage lenders like to see at least 2 accounts currently reporting for at least 2 years. Sometimes it can be helpful to leave an old account open even if you don't use it to maintain that credit history. We also caution against opening too many new accounts if you're trying to qualify for a mortgage as new accounts can temporarily drop your score.

3. Payoff Collections

   Most lenders will not loan money for a mortgage while there is still a collection reporting so it's best to get it taken care of now.

When it comes to getting a mortgage lenders like to see a score over 630 but the higher the score the better the rates and the more options are Grande Prairie Mortgage team has available! If you are looking to get a mortgage with some past credit issues, reach out to our team to see what options available we have for you!