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At some point in your life, you have probably heard someone say that building and maintaining good credit is important. Have you ever wondered why? If you have ever applied to rent an apartment, you probably know that a prospective landlord is likely to do a credit check. But good credit is important for a host of other reasons as well including getting certain types of jobs, applying for a car or business loan or getting approved for a mortgage.

Before a lender will approve your mortgage, they will naturally do some digging into your credit history. Your credit score (ideally above 700) will be important, but so will other factors such as total debt load, payment history, age of accounts and so forth. The better your credit is, the better terms you will be able to get on your mortgage.

So with that in mind, here are a few tips on how to ensure you have a good credit report when the time comes to apply for a mortgage:

  1. Make sure you have a credit history. Just because you do not “need” to borrow right now, does not mean you should not. When you apply for a mortgage, your lender will want to see a credit history. You can start to build this by applying for and using a credit card. Just make sure you are able to pay it off each month.
  2. Pay your bills on time. When you go over the usual allotted 30 days to pay your bills, this is reflected in your credit report. While most utility bills are not reflected in your report, cell phone bills, car payments and credit cards are. The more late payments that are reflected on your credit report, the worse your total score is going to be.
  3. Try to pay your bills in full; doing so will help prevent debt from accumulating because of interest payments. If you cannot pay the full amount, at least make minimum payments – or more if possible.
  4. Limit the number of credit applications that you make. If multiple lenders are making enquiries about your credit, it can have an impact on your credit score. If you need to make multiple applications, at least try to space them out.
  5. Check your credit periodically. One of the fastest ways that someone’s credit can become ruined is if they are a victim of identity theft. Unfortunately, most people do not know that they are victims until the creditors start calling them. By periodically checking your credit, you will be able to see if any unauthorized accounts have been opened and you can take steps to rectify the situation before it becomes a serious problem on your credit report. The two companies in Canada that keep your credit records are TransUnion and Equifax and you may contact either to obtain your credit report.

Getting approved for a mortgage starts before you are even in the market to buy a home. It starts by building up good credit so that you have the best chance possible of getting approved. While your credit report is not the only factor in getting approved (income and savings will also be considered), it is an important one. Follow the above tips, and keep your credit score in good repair and you will be well on your way to being accepted for the mortgage for your new home.

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