Did you know that the interest rate you pay on loans, such as your mortgage, car loan or line of credit, is heavily dependent and based on your "creditworthiness"?
Creditworthiness is a VERY important concept, especially if you are thinking of buying a home, but before we get ahead of ourselves, lets ensure that we are all on the same page by understanding What it is and Why it's important to us. So lets start with the basics shall we?
What is it?
Creditworthiness is a reflection of your ability to pay back a debt, or in other words, determines how likely you are to repay a loan. So the more creditworthy you are, the more likely the bank will lend you money and the LOWER the interest-rate will be.
So now the big question, WHY should you care?
Well, with the evolving mortgage changes, stricter lender guidelines and rising interest rates, your credit score has become even more important to you. This not only impacts your ability to get a mortgage, but more importantly, how much you will pay in interest for that mortgage.
Okay, so how do I find out Where I stand?
The first step to becoming Credit Aware, is to request a free credit report online from either two of our credit-reporting agencies: Equifax Canada and TransUnion Canada.
Using credit PROPERLY (meaning you make your payments on-time, every-time!), keeps your credit score healthy as a horse.
Forget to pay a credit card bill?
Deep breaths.. you're okay! Your credit will only take a big hit after missing TWO consecutive payments, which can have instantly drop your score by 60-100 points. EVERY point counts, so you definitely don't want this to happen, especially if you're planning on buying a home, so set a reminder in your phone each month to pay your bills!
Following are some KEY components that help determine your credit score:
⓵ Credit Card Debt - the #1 way to to boost that credit score is to pay down your credit cards
⓶ Credit History - your history of being able to successfully make payments on your lines of credit
⓷ Credit Reporting Errors - ALWAYS dispute any mistakes that may harm your credit, for example, an incorrect cell phone bill.
If you still have questions about your creditworthiness, or would like to build a plan to repair your credit, then lets chat!