There’s a lot of information floating around the internet regarding credit and what it should look like. For potential homebuyers it can be confusing to sift through all the articles when all they really want to know is what lenders are looking for in a credit report. The answer does involve a few formulas, but it is far from rocket science. Here is what Canadian lenders want to see when they examine your credit.
Your credit can be amazing, but if the report is too short, the lender won’t be impressed. The length of time you manage debt is an important deciding factor when approving loan applications. Mortgages aren’t short-term commitments, so lenders want to know that you can handle more than a couple years of monthly payments. The longer the credit history, the better.
Lenders want to see that you have utilized a number of different types of loans. Credit cards, car loans, and lines of credit are just a few of the ways you can show fiscal responsibility. You don’t need to borrow millions of dollars to prove your worth, but a little bit of variety goes a long way.
Regardless of what kind of loans you have acquired, it’s important that you are paying them off according to their specific agreements. Ensure you’re meeting monthly payments regularly. This shows lenders that you can adhere to the monthly installments.
None of the above factors mean a thing unless you have a manageable debt-to-income ratio. If your debt is too high, it’s unlikely that you’ll be able to successfully manage a mortgage on top of everything you already have going. The Canadian Mortgage and Housing Corporation recommends that your housing costs should use up 35% or less of your monthly income.
Follow these guidelines to help bolster your credit report and entice mortgage lenders to accept your application. Different lenders will have their own requirements, but the general consensus is a minimum of 640 for a credit score. If you can, don’t just settle for the minimum, but try to exceed that number. If you’re ready to start applying, call us today at 403-341-7800!
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
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