In order to purchase a home, you must have
an established credit history. Each time you pay a bill (for your credit card
or for a monthly service such as your telephone or electricity), you are
establishing a credit rating for yourself. A credit rating is a number or score
that banks, mortgage companies, and other lending businesses use to assess your
level of financial responsibility.
Paying your bills on time every month,
contributes to having a good credit rating. If you miss payments, or are often
late making your payments, your credit rating is probably not as good, and
money lending institutions will consider this when you apply for a loan.
Numerous factors contribute to your overall credit score, such as outstanding
debt, payment history, severity and frequency of derogatory credit information,
and the amount of credit you use compared to what you have available.
Also important is the length of your credit
history. For many immigrants, this only begins after entering Canada.
To begin to establish a credit history:
§
Open an individual savings or chequing
account in your name. From this account, your deposits, withdrawals, and
transfers will demonstrate that you can handle more efficiently and
responsibly.
§
Applying for a smaller loan demonstrates
responsibility, and will positively affect your credit rating over a longer
term, once you demonstrate that you can make timely and consistent payments.
§
Other forms of credit include department
store and gasoline credit cards. These are generally easier to obtain than
major credit cards and, if used responsibly, can also serve to enhance your
credit rating.
§
In short, there is no quick way to
establish credit. It is much better to go slowly and develop a strong credit
record than to apply for too many credit cards or a loan that is larger than
you can handle. Mortgages are long-term commitments, so appreciate that lenders
will need proof of longevity and consistency.
Your
Credit Rating
Once you’ve begun establishing your credit
history, it is a good idea, and your right as a consumer, to know exactly what
your credit rating score is, even if you always pay your bills on time.
In Canada, Equifax Canada and TransUnion
are the two major credit rating companies and will give you a copy of your
credit history and overall credit rating score, usually for a fee.
(Source: Genworth Financial / http://www.genworth.ca/mi/eng/home_ownership/credit_history.html
)
philromano@vhme.ca
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