Credit Challenges

Credit Challenges

Credit Challenges

Today’s economic climate of tighter credit requirements and increased unemployment rates are taking their toll on some Canadians. There is no doubt that many people may not fit into the traditional banks’ financing boxes as easily as they may have just a year ago.

The best solution is to consult a mortgage professional. They can determine whether your credit situation can be quickly repaired or if you face a longer road to credit recovery. Either way, there are solutions to credit challenges.

Mortgage professionals are experts in the credit repair niche. They can help credit challenged clients improve their situations via a number of routes. If the situation is beyond the expertise of a mortgage professional, they can help you get in touch with other professionals. They may be credit counsellors or bankruptcy trustees.

If you have equity built up in the home and still have a manageable credit score, you can refinance the mortgage and use that money to pay off high-interest credit card debt. By clearing up this debt, you are freeing up more cash flow each month.

In the current lending environment, with interest rates at an all-time low, now is an ideal time for to refinance your mortgage and possibly save thousands of dollars per year. This enables you to pay more money per month towards the principal on your mortgage as opposed to the interest – which, in turn, can help build equity quicker.

Following are five steps you can use to help boost a credit:

1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so you’re only using 30% of your limits. Revolving credit like credit cards seems to have a more significant impact on credit scores than car loans, lines of credit, and so on.

2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there is a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month.

3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders may view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you.

Some financial institutions don’t even report maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if one consistently charges the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards.

The best bet is to pay any balances down or off before the statement periods close.

4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating the accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. You should use these cards periodically and then pay them off.

5) Don’t let mistakes build up. You can always dispute any mistakes or situations that may harm your credit score. If, for instance, a cell phone bill is incorrect and the company will not amend it. You can dispute this by making the credit bureau aware of the situation. Here is a link to dispute with Equifax

If, however, there has been repeatedly missed payments on credit cards, you may not be in a situation where refinancing or quickly boosting your credit score can be possible. Depending on the severity of the situation – and the reasons behind the delinquencies, including job loss, divorce, illness, and so on – your Mortgage Tailors mortgage professional can help you address the concerns through a variety of means and even refer you to other professionals to help get your credit challenges in check.

Categories: Edmonton Mortgage Broker, Mortgage Advice