One of the key components of becoming a homeowner is ensuring that you have a good credit score. Banks will use your credit history to determine whether or not they can rely on you making your monthly mortgage payments on time. But for many Canadians this poses a serious challenge, since the last five years has put a financial strain on a great many people, leading them to have use borrow money from various source and sacrifice their higher credit scores that they may have held in the past.
Thankfully there are many ways to improve ones credit score, and those ways are what this article is all about it. Below is a list of truly effective ways to improve your credit score to speed up your journey to becoming a homeowner.
Rent-To-Own
One of the best ways to improve your credit score, is to choose a rent-to-own program. While you are making your monthly rent payments, a portion of those payments are going towards your homeownership which automatically reflects positively on your credit.
Cancel The Unnecessary
Today’s world is one of subscriptions. Too many of us have subscription services that place a financial burden on us at the end of each month that we don’t really need, which in turn makes it difficult for us to pay off our debts.
One of the best ways to improve a credit score is to reduce unnecessary spending and put that money towards clearing out any debt, including credit card debt. $9.99 here and $19.99 there can really add up, so the first line of order to a credit increase is to remove any subscription that you can live without and put that money towards your monthly debt payments. Just one month of paying a higher amount on your principal debt can significantly increase your credit score. After three to six months of consistent increased payments it can go up as much as 300 points. This type of increase is essential when seeking out fair mortgage rates with lowered interest terms.
Pay Your Credit Card Immediately
Paying off your credit card prior to the monthly billing calculating is imperative to increasing ones credit score. Depending on the terms and conditions of the contract, the interest may not be applied immediately, and if so the heavy interest charged at the end of the monthly cycle can be reduced. Paying off a credit card immediately after purchase is a great way to save money and build credit at the same time, so if you can afford it, do it.
Reduce Your Sources of Credit
When you have less things to pay for, it’s easier to make your payments. As with food and so many other things in life, there is a sweet spot when it comes to how many things your paying for that is tied to your credit. Too much, and its difficult to make substantial payments, lowering your credit score. Too little and it seems as though there is no reason for you to even have a credit score, which does little to no good. The best route is to ensure that you have an adequate amount of things tied to your credit score, but that you are able to make decent payments on all of them when the bill comes due.
Get Credit When Needed
One of the worst things a person can do credit wise is to apply for it when they don’t need it. Applying for multiple forms of credit within a brief period time when it isn’t completely necessary is bad for ones credit health. The multiple checks can severely negatively impact ones credit score. So unless completely necessary, it is best to avoid this practice.
Conclusion
If you want to become a homeowner, it’s not only possible, but it can be done sooner than you may expect if you make sure to take care of your credit score. By reducing your spending habits and ensuring that you have a history of good credit, you can acquire a favourable mortgage with reasonable interest rates.
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