Increase Your Credit Score As Much As You Can

No one ever regrets increasing their credit score. Those who tell you it’s not important are either misinformed or not being honest.

But, I suppose you might never need a decent credit history if:

  • You plan to live your whole life in your parents’ home or with friends and other relatives
  • You never plan to lease or finance a car
  • You don’t care about how much you pay for insurance
  • You don’t ever plan to buy a cell phone on a two year plan
  • You don’t ever want to use a personal credit card
  • You don’t plan to rent a car or check into a nice hotel
  • You have no designs on home ownership

For the rest of us — probably 99% of the general population — having a healthy personal credit history is essential to our well being. Especially if we might want to lease a car, rent an apartment, own a cell phone or even own a home one day.

And if we do own a home, we had better do the best we can to maintain (or improve) our personal credit history, since mortgage lenders are watching very (very) carefully.

We all know that credit is a cornerstone of the mortgage application when buying a house. It’s right up there with income and employment, our integrity and the specific property we want to buy.

It’s just as important when our mortgage is renewing, or anytime we want to refinance our mortgage.

Related Blog Post: MORTGAGE RENEWALS IN 2018

In other words, once you are a homeowner, you must always care about your personal credit history.

Do not neglect it.

Now, to be sure, sometimes life events come along that throw us for a loop.

Extended unemployment, illness or a death in the family are parts of our story we cannot anticipate. Or perhaps debts get out of hand, we get behind with CRA or maybe even end up having to file a consumer proposal or declare personal bankruptcy.

Things happen (boy do they ever).

The important thing is rather than being scared to peek at the damage we may have done to our credit, we must face it head on. We must examine our credit history and understand why it scores the way it does, and what is in the report that we can improve, or even correct if there are actual reporting errors.

I should also mention, at Ross Taylor & Associates, we are credit history experts, with fifteen years’ experience reviewing, rebuilding and restoring personal credit histories to a pretty glorious state.

It’s kind of “our thing”.

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To illustrate why you should increase your credit score as much as you can, I will share a few recent examples we came across.

Not enough credit history

Jake and his wife really want to buy their first home and have saved enough for a 5% down payment. He makes very good money as a heavy equipment mechanic.

But he does not own a personal credit card. He got into trouble with a card ten years ago. He paid it off, closed the card forever, and swore them off.

He has had a car loan the past year and a half. But that’s it.

The result: Jake does not qualify for a mortgage now. He needs a CMHC insured mortgage, and they require a personal credit history at least two years old, with two credit facilities ideally.

Sloppy repayment history

Jerome and his wife own a million dollar home west of Toronto and have accumulated a sizeable amount of debt. Jerome wants to refinance their mortgage and use the low interest rate to consolidate everything into one single payment.

The problem is he has a history of missing credit card and loan payments. In fact he missed several as recently as four months ago. His personal credit score is only 595.

Result – no “A” lender wants to grant this mortgage. He can choose to take a private second mortgage for a year, planning to consolidate both mortgages after a year of responsible credit management.

Or he can break his current mortgage and put it all together with a “B” lender. He is looking at a mortgage rate of around 4.5% and a lender fee of 1% of the mortgage amount.

Had he been less cavalier about paying his debts on time, he would not be in this mess.


Consumer proposal – no re-established credit

James and his wife completed a joint consumer proposal eighteen months ago. They have been saving for a house and have a decent down payment.

The problem is they waited too long to begin rebuilding their personal credit histories. They both got a Capital One credit card with $500 limits earlier this year.

They thought that simply completing their proposals on time would rebuild their credit history. They did not understand the importance of NEW credit.

The result being they are probably (still) one to two years away from home ownership. And they both really should get a second credit card.

Primed to Purchase - Dowload you free preapproval guide text

 Consumer proposal – with re-established credit

Jerry completed his consumer proposal in May of 2017. At the time, his credit score had fallen to only 545. He asked us to help rebuild his personal credit history, so we helped him get two new credit cards and also cleaned up reporting errors in his Equifax report.

We checked in with him six months later to confirm he was staying on track. One year after he paid off his consumer proposal, Jerry wanted to refinance his first mortgage to 80% of the value of his home.

The result was we submitted his application along with his fresh credit report showing a score of 721 – Wowza! And… he was quickly approved for a one year mortgage at 3.79%.

Jerry is a happy camper. In one year, Jerry’s personal credit score jumped from 545 to 721!


The takeaway

(Please, please, please) do not neglect your personal credit history!

Rather, optimize it as much as you possibly can. It could save you many thousands of dollars in the future and help you live the life you are working so very hard for.

Financial Literacy Leader of the Year Award 2017 Crest
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