Today’s economic climate of tighter credit requirements and increasing unemployment rates taking their toll on some Canadians, there is little doubt that many people may not fit into the traditional banks’ financing boxes as easily as they may have even a year ago.
The best solution is to consult a mortgage professional who can determine whether your situation can be quickly repaired or if you are facing a longer road to credit recovery. Either way, for every problem, there is a solution.
The professionals at Regional Mortgage Group are experts in helping our clients repair their credit and improve their financial situations via a number of routes. If the situation is beyond our mortgage professionals’ expertise, we can help you connect you with the professionals who can help, including credit counsellors and bankruptcy trustees.
If you have equity built up in your home and you still have a manageable credit score, you can often refinance your mortgage and use the money to pay off high-interest credit card debt. By paying off this debt, you are freeing up more cash flow on a monthly basis.
The current lending environment, with interest rates at an all-time low, is the ideal time for refinancing your mortgage and could possibly save you thousands of dollars a year, enabling you to pay more money per month towards the principal on your mortgage as opposed to the interest, which in turn can help build your equity faster.
Here are five steps you can utilize to boost your credit score quickly:
- Pay down credit cards. The best way to increase your credit score is to pay down your credit cards until they’re at 30% of your limit or lower. Revolving credit, like credit cards, seems to have a significant impact on credit scores compared to car loans, lines of credit, and so forth.
- Limit the use of credit cards. Racking up a large sum on your credit card and then paying it off in monthly installments can be detrimental to your credit score. If there is a balance at the end of the month, this will affect your score – credit formulas do not take into account the fact that you may have paid the balance off the following month.
- Check credit limits. If your lender is slower at reporting monthly transactions, it can have a significant impact on how other lenders may view your file. Ensure everything is up to date, as your old bills that have been paid can come back to haunt you. Some financial institutions do not even report your maximum limit. Because of this, the credit bureau is left to only use the balance that’s on hand. The problem is that if you consistently charge the same amount each month – for example, $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 down your balances before your statement periods close.
- Keep old cards. Older credit is better credit. If you decide to stop using older credit cards, the issuers may stop updating your accounts. This means the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even through you have had the cards for a long time. Try to use these cards periodically and then pay them off.
- Don’t let mistakes build up. You should dispute any mistakes or situations that may harm your score. If, for example, 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.
However, if you have repeatedly missed payments on your credit cards, you may be in a situation where refinancing or quickly boosting your credit score will not be possible. Depending on the severity of your situation – and the reasons behind the delinquencies, including job loss, divorce, illness, etc. – your Regional Mortgage Group professional can help you address the concerns through a variety of means and we can also refer you to other professionals who can help get your credit situation back in check.
If you have any questions about rebuilding your credit, please don’t hesitate to give us a call.