Because we are credit specialists as well as mortgage agents, at Ross Taylor & Associates we help many clients who are trying to improve their credit history. Some have gone through consumer proposals, debt settlements, or even personal bankruptcy. Not everyone. Some others hit hard times in the past, often because of job loss or marital break-up; and when that happened, scheduled payments were often missed.
Over the weekend I was contacted by a couple who want to buy a builder home this week, and then take possession in the Spring of 2016. They have their down payment saved up, and they make decent income, so they are not too worried about those conditions. But they are concerned about their credit histories – Kathy’s Beacon score is 570, and Jim’s is only 545.
They need to know that if they sign up with their builder this week, that their credit will improve sufficiently over the next year to qualify for a low rate mortgage with a ten percent down-payment.
I responded and said yes it is possible to improve your score by 100 points or so in a year, but no two cases are the same, and I could not say they have nothing to be concerned about without seeing their actual reports. I offered them a free consultation – either in my office or on the telephone, to review their credit reports and give them some solid advice.
Kathy and Jim are taking this seriously. They have already subscribed to a service from Equifax Canada which allows them to check their credit history as often as they want, whenever they want. For people who are rebuilding on a set schedule, this is an excellent service. It costs $19.95 each month, and you can cancel anytime. Kathy emailed me their reports and we were on the phone the next day.
I saw they had two items in collection status – one is due to fall off their report in a few months, the other will still be there this time next year. I advised they leave the first one alone, but they contact the collection company for the other and negotiate a complete settlement. They do not want any open collections on their reports when it comes mortgage time.
- Closing open wounds (like unpaid collections)
- Allowing time to be your friend – the more time elapsed since a negative occurrence, the less impact it has on your score
- Building up your score through the responsible use of new and existing trade lines and loans
Here is some of the advice I gave them – it could apply to anyone in similar circumstances:
- Ensure you have at least two clean credit facilities (not counting your cell phone and mortgage) – could be revolving credit or a loan or lease. If you only have one, get a second credit card as soon as possible – even if you have to put up a security deposit
- Make multiple payments towards your credit facilities each month. Don’t wait for the statement to arrive. Your card issuers will love this and may even increase your limits. Higher limits can mean higher credit scores
- Don’t do anything which might trigger a credit inquiry, unless you absolutely have to. (Good thing though is you can check your own credit as often as you want)
- Try to pay your balance in full each month, and ideally a few days BEFORE your next scheduled statement dates
If you do need a new credit card, and your score is ugly, you are unlikely to be approved for an unsecured card. If you think you want a credit card secured by your own money, you can try this one.
Oh, by the way, I am confident Kathy and Jim will improve their scores sufficiently by next year. They are very happy to hear that and are marching down to the builder’s sales office this weekend!
Related article: Ten credit history myths
Related article: Reestablish your credit after a consumer proposal or bankruptcy