A quick guide to credit scores

Bying a house starts with your credit score. Here's what you need to know.

By Homicity

May 30, 2018

A quick guide to credit scores

The process of buying a house starts earlier than you think. It starts the second you begin building credit. Before you jump into real estate, it is essential to look at your credit score.

Credit scores are important because of one simple reason. They will determine the interest rate on your mortgage.

Your score shows money lenders you are worthy of trust based on your past behaviour. Would you lend money to somebody who usually is late on payments? Or doesn’t pay back at all? The obvious answer is no. Your score lets lenders know if you have been naughty or nice.

Credit scores range from 350 to 850. A high one equals trustworthiness and a lower interest rate. In the end, good behaviour pays off. On the other hand, a low score means a higher interest rate and a long road to credit recovery.

Checking your score is easy. You can see it through online banking services or order a free credit report through the mail with Equifax.

Here are three simple tips to start building good credit:

1.    The 30% rule

Make sure you don’t go overboard and spend more than what you are allowed. A $1,000 credit card doesn’t mean you have $1,000 to throw at whatever you want. Spending no more than 30% is recommended.

 

2.    Pay on time

Don’t procrastinate and ensure you are nothing but punctual when it comes to bill payments. Be late by one hour and this might impact your score.

 

3.    Pay off everything

There should be no explanation as to why paying back in full each month is essential. Your payment history will be the primary factor determining how creditworthy you are.

 

Once you start building credit, you are ready to start searching for a house.

Homicity

Homicity helps you find your dream home in the perfect community. Whether you are buying, renting, or selling, you can navigate the Canadian real estate market with confidence with our expert advice, market news, and recommendations powered by AI.

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