Top 5 Ways To Improve My Credit Score

The most important criteria financial institutions used to determine a mortgage approval is credit. Not surprisingly, many of our clients will ask us how to Improve My Credit Score. At Mortgage Architects, we really believe our clients should understand how these banks think so they can better prepare for a lifetime of cheap financing. The two major reporting agencies Equifax and Trans Union use an algorithm (whatever that is!) to determine your individual score. Since we are not that smart, we will try to explain using a system of importance by weight. This is useful when determining ways to Improve My Credit Score. The most important factors are the first two:

1. Payment History: 35%

We weigh this factor as about 35%. The banks are like friends. If money is lent, you must pay them back (on time) if you ever expect them to lend money to you again!

2. Credit Balance vs. Limit: 30%

The credit you have used compared to the amount of credit available weighs in at about 30% of how they calculate your credit score. Generally speaking, you should never exceed 70% of your credit limit. Example: if your credit limit is $10,000, your balance should be $7,000 or less if you want to Improve My Credit Score. High credit balances indicate lack of money management and possible desperation. You do not want to (falsely) advertise that you are desperate!

3. Credit History: 15%

This is an important one to consider when thinking how to Improve My Credit Score. Credit history is different from payment history. It refers to how long the credit has been opened. It goes back many years to show how many items you have had. Example: line of credit, loans, credit cards, mortgages.

4. Public Records: 10%

If you have any legal inquiries such as collections or bankruptcies, that will appear on your credit bureau and weigh down your credit score.

5. Number of Inquiries: 10%

This really surprised us. The number of inquiries has less importance than delinquencies, balances, and the period of time that you have personally had credit.

It must be remembered that this is how the credit agency scores you. But take a look at a major bank like Scotiabank. They put a massive weight on public records. What do I mean? If you have had a bankruptcy within seven years of discharge, they will not even entertain your application! Or just like Donnie Brasco would say “Forget about it!”

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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