Most people dream of owning a home, but few go on to accomplish this dream. Buying a home requires a huge financial investment and for most people it can take years before they finally become homeowners. Financing can be a problem and most people require a loan before they can afford to buy a home. Credit scoring is a system through which credit is assessed and it helps to determine an individual’s credit worthiness. The scoring is based on current credit account as well as credit history. Lenders see individuals with low credit as having a higher risk of defaulting on the terms of the loan.
Bad credit can be a noose around your neck and it can become a real problem when you need a loan. If you have decided to buy a house, your credit rating will determine the type of mortgage you can get. Lenders look at the borrower’s credit history and they do not offer conventional mortgages to borrowers who have a low credit rating. An individual with poor credit can get a bad credit mortgage or a sub-prime mortgage that usually comes with higher interest rates than a conventional mortgage. Improving your credit can help immensely and there are ways you can do this quickly.
Check the report for errors
Experts in the mortgage industry agree that almost one third of all Canadians have errors appearing on their credit reports. This means that you could be one of those people who are being penalized for no fault of yours! Make sure that you order for a copy of your credit report and inspect it for errors. There are many types of errors ranging from having an account from someone with the same name attributed to you, to cases of fraud. Go through the information on the report and follow the instructions given to highlight any existing inconsistencies.
Do not max out your credit cards
How you use your credit cards will affect your credit score. It should go without saying but having maxed out cards and some accounts with zero balance is not a smart financial move. You could be damaging your credit score by using your credit cards irresponsibly. One of the factors that determine a strong credit score is having available balances that are at the maximum credit limit. To improve your score or keep your rating strong, distribute your debt more effectively over the various cards. If you are planning to apply for a mortgage soon, you need to make some changes in how you use your credit cards.
Your fight with the phone company
You may have a good case against the phone service provider but prolonging the fight can actually work against you. One of the most common reasons why many individuals have damaged credit is due to issues with the phone company. The company may have overcharged you but the longer you continue fighting, the more damage it is doing to your credit score every month. The best thing you can do is to pay the bill in full and then continue your fight. Do not allow a mere $200 to cause you to pay thousands more in interest on your mortgage.
Think about debt restructuring
If you are overwhelmed by debt or facing cash flow problems, you can make some changes that can improve your credit score and your financial situation. If you have a home loan, debt restructuring can be a viable option for you. A good debt consolidation plan can give you much needed relief by saving you hundreds of dollars in monthly payments. Talk to a financial expert about your options and you can end up experiencing an instant improvement in your credit.
Keeping an old credit account active
If you have received a new credit account that promises new incentives, you may be tempted to get rid of the old account. While this may seem logical, you may actually end up doing your credit history a disservice. Do not fall into the temptation to give up the old for the new but instead keep the old account active. The strength of your credit will depend on your ability to be consistent over the years. Having an account that has been active for a decade can show your ability to be responsible and it can speak well for you when you apply for that loan.
Making these five changes is relatively simple and yet doing so can improve your credit rating. When you consider the savings you will be making in interests, you know that making the changes will be worth your while. You can take control of your credit report so that you can be on your way to a brighter financial outlook. Having debts weighing you down is not just bad for your financial position; it is also bad for your health!