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Credit Scores: What Are They Having a public record of being in collections or bankruptcy may also impact your credit score.

Another factor is how you use your credit. You’ll want to avoid charging up to the maximum amount or upper limits
and What Affects Them? of your credit card. Hinojosa suggests keeping your credit charges to around 30% of your limit each month. Thirdly,
your credit score is influenced by how much credit you have available. Occasionally, Hinojosa sees consumers that
don’t have any credit, or those that believe using credit is a bad thing. However, having a history of varied credit use,
Michelle McNally courtesy REALTOR.ca such as a couple of credit cards and a car loan, proves you have a history of making payments.
uch like your income and down payment, your individual credit score is a major financial component of How long you’ve had access to credit is
qualifying for a mortgage when looking to buy a home. Your credit score will be one of the main criteria also important, as the more time you’ve
Mlenders will examine when applying for a mortgage, so it’s important to ensure your score is in good had credit history, the better. Hinojosa
standing before embarking on the home purchase process. But what exactly is a credit score, and what sets a good compared this to car insurance.
score apart from a bad one? “Usually when you’re a new driver, it’s
Frances Hinojosa, CEO, co-founder, and principal mortgage broker at Tribe Financial Group, explains what you should a bit more expensive. Whereas if you
know about credit scores and what factors influence them. have a good driving history, the longer
the good driving history, the lower your
What is a credit score, and why is it important? insurance premium,” she explained. “It’s
In simple terms, a credit score is an evaluation of how you maintain and utilize credit, such as credit cards, loans, very much the same when it comes to
mortgages, and other credit facilities. credit. The longer you show a history of
repeating good credit, the better it will
Hinojosa says many people don’t realize their credit score is one of the biggest indicators when it comes to the be for your credit score.”
mortgage qualification process, and could impact the interest rate you receive for your mortgage.
Finally, making an inquiry on your credit
“That’s one of the very first things a bank or a mortgage broker would consider or would look at,” she explains. “It’s accounts for 10% of your overall score.
equally as important as your income or affordability of paying a mortgage.” Some consumers tend to get concerned
when they’re shopping for a mortgage
Hinojosa says many mortgage products are credit score- that they’re going to take a hit on their credit score, but Hinojosa says consumers shouldn’t be overly concerned if a
driven, meaning your credit score will determine what lender is making an inquiry as part of the mortgage process. On the other hand, Hinojosa says you may not want to
interest rates may be made available to you, as well as apply for many types of credit all at once, as this will result in multiple back-to-back inquiries.
your ability to qualify for certain mortgage products
and types. “If you already have excellent credit, let’s say 720, [at] 10% of that, it’s only going to impact your score by seven
points,” she said. “It’s not going to put you from an excellent category to a bad category. It’s probably the least of the
A score of 680 and above is the sweet spot that’ll give indicators to worry about in the overall impact of your credit score.”
you access to most products—anything less than this
might limit your options. If you have a score of 600 or How can I improve my credit score?
less, you may be looking at higher risk-based pricing on If you’re planning to buy a home in the future, but aren’t sure how your credit score stacks up, Hinojosa says making
your mortgage and interest rate offerings. inquiries in advance with a mortgage professional can be helpful to find solutions for tweaking your credit score.
Your credit score is determined by a number of factors, In some cases, home buyers may need to address items in collections, pay down their credit limits, or make other
such as your credit payment history, the amount of changes to bump up their score.
credit you have available, and how long you’ve had it “I don’t think too early is ever too soon,” said Hinojosa. “If you’re thinking about financing a home, don’t be afraid to
for. Having a healthy credit score demonstrates to a have a conversation and start the process because there are always solutions to every situation. It’s just about sitting
lender you can meet your payment commitments over down with the right mortgage professional to map it out for you.”
time. It can take time to improve your credit. Hinojosa explains credit is reported on a month-by-month basis, so it may
“It shows the consumer is responsible and has a track record of owning up to their obligations and paying as agreed,” take a few cycles or more to get your score where you want it to be. In cases where a home buyer needs to secure a
said Hinojosa. “That also plays into risk-based pricing on the actual mortgages, as well.” mortgage quickly with their current credit score, Hinojosa says a mortgage professional can explore different options.
“In some cases if they have to purchase right away or they need to do a mortgage transaction right away—I like to call
What factors determine my credit score? it stepping stones—they may have to look at an alternative type of lender which might come with a slightly higher
There are a handful of indicators that play a role in shaping your credit score, according to Hinojosa. interest rate,” said Hinojosa. “However, it’s still affordable with your cash flow and it’s just a stepping stone that will get

One of the most influential factors is your payment history, which includes making sure you pay your debts on time. you in a year or two over to a traditional bank.” ■
Thirty-five per cent of your credit score is based on payment history. If you can’t pay off your credit card in full, The article above is for information purposes and is not legal or financial advice or a substitute for legal counsel.
Hinojosa recommends making at least the minimum payment by the due date to keep your score in good shape.

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