How to Improve Your Credit Score Before Applying for a Mortgage?

Imagine standing outside your dream house and your heart beating faster than ever. You have finally discovered the ideal home, and you can already picture your future within its walls. But before you can make that dream a reality, you must face the reality of your credit score. The truth is that when applying for a mortgage, your credit score is crucial. That figure can make or break your chances of getting that mortgage. 

But no more tossing and turning at night, wondering if your credit score will be why your dream home slips through your fingers. Don’t worry too much about your bad credit score, you can apply for bad credit mortgages in Canada. And also, we are here to give you the best advice which will help you improve your credit score and increase your chances of getting approved for a mortgage.

1. Check your credit report:  Ensure there are no mistakes or irregularities that could harm your score before taking any further action. You can get a free copy of your credit report from each of Canada's three major credit reporting agencies. (Experian, TransUnion, and Equifax). You are entitled to one free credit report per year.

2. Pay all your bills on time: Late or missed payments can seriously damage your credit score. Your payment history influences your credit score. Verify that you are paying all your bills on time, including credit card, loan, and other bills. Late payments can negatively affect your credit score and remain on your credit report for up to seven years. Also, try to keep your balances low; a high outstanding balance indicates that you might be struggling financially. This could make lenders hesitant to loan you money.

3. Close any unused credit accounts: Avoid opening new ones, and close all the unused ones and the loans you might have applied for in the past. If you have a recent credit history, opening new credit accounts will lower your credit score. 

4. Paying off credit card debt: You should always check your credit usage ratio, or how much of your available credit you are using. This is one of the main elements determining your credit score. Your credit usage percentage should ideally be lower than 30%. If your credit card debt exceeds that amount, consider paying it off before submitting a mortgage application.

5. Take expert advice: If you are unable to raise your credit score on your own, or the steps you are taking are not having any impact on your score then consider talking with a credit counsellor. They can assist you in developing a strategy to reduce your debt, make timely payments, and increase your credit score.

6. Monitor your credit score: By regularly checking your credit score, you can see any alterations or mistakes that might be harming it. Try using free monitoring services that are available online to keep yourself updated, which will also determine your mortgage eligibility.

7. Boost your earnings: Although your income is not directly related to your credit score, a higher income can aid in better debt management and lower credit utilisation. Think about ways to enhance your income, such as taking on a side hustle or freelancing.

Improving your credit score cannot happen in one go; you need to take small steps towards building a solid credit history. Following the above advice would be a perfect start towards preparing for your mortgage journey. With patience, persistence, and a little creativity, you can take control of your credit and achieve your dream of owning a home in Canada.