Improving your credit score is an important and measurable step in the right direction for those wanting to take the leap from renting to home ownership.
A good credit score opens doors to favourable mortgage rates, better loan terms, and improved chances of approval.
Darlene Mounkes and Alison Low, your local Rimbey CIR Real Estate agents, share insight on what a credit score is, why it matters, and how you can improve it.
“A credit score is a numerical representation of how ‘creditworthy’ an individual is. It helps banks determine how likely someone is to repay borrowed money,” Mounkes explains. “Mortgage lenders utilize credit scores as a form of risk assessment.”
Simply put, the higher the credit score, the lower the risk a borrower presents, and the more likely a mortgage lender is to approve a loan. This means credit scores play an important role in helping individuals achieve their homeownership goals.
“It’s important to understand how a credit score affects your ability to purchase a home. For example, if someone has a good down payment saved up but has a low credit score, they’ll likely be faced with higher interest rates or simply not be approved at all,” Low says.
When applying for a mortgage in Alberta, credit scores should be 650 or higher. If you’re not quite there yet, you can take steps towards improving your score:
- Pay bills on time: Consistently paying your bills on time is one of the most effective ways to boost your credit score. Set up automatic payments or reminders to ensure you never miss a due date.
- Reduce debt: Aim to keep your credit card balances below 30 per cent and pay off any outstanding debt.
- Limit new credit applications: Each time you apply for new credit, it can temporarily lower your score. Avoid opening multiple new accounts within a short period and only apply for credit when necessary.
- Monitor your credit report: Regularly check your credit report for errors or inaccuracies that could be dragging down your score. Report any discrepancies to the credit bureau (Equifax or TransUnion) for correction.
- Diversify credit types: Having a mix of secured and unsecured credit demonstrates your ability to manage different types of debt responsibly. Secured debt is generally a mortgage or car loan, and unsecured debt could be a loan or credit card.
“Rimbey continues to be a great place for families or those looking to downsize and come back to a simpler way of life” Mounkes says. “Currently there are six single-family homes on the market with an average list price of $437,000, and over the last 180 days, 13 Rimbey-area homes have sold with an average sale price of $302,000. Over the past two years we have seen an increase in demand for the higher priced properties, than we have previously.”
Looking to buy or sell a home in Central Alberta? Contact Alison Low by mobile at 403-783-0369, or email at alow@cirrealty.ca or Darlene Mounkes by mobile at 403-783-1637, or email at dmounkes@cirrealty.ca.