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Posts tagged ‘credit history’

How to Buy a House With Flawed Finances

house white picket fence

Houses are freaking expensive. Probably the most expensive thing you’re going to buy. And they can be a pain to pay for if the banks don’t like your credit. But Fox Business has a couple good tips to help you out.

How to Buy a House With Flawed Finances

The housing market is showing signs of recovery after the housing crash, but many of the homeowners who were foreclosed upon during that time or forced to short sell have found their credit and finances heavily damaged.

Some of those people may never want to own again, but for those who want to give it another shot, there are a few things to keep in mind this time around. The answer to whether you can buy a home with flawed finances is simple. Yes, you can buy a home. But there are some steps you can take to give yourself the best chance at keeping your home for the long run.

Build a Solid Emergency Fund

This is by no means a requirement for buying a house, but it’s one of the smartest things you can do before the homebuying process even starts. Potential homeowners should save up at least three months’ worth of expenses (including mortgage) in order to weather a job loss, family illness or other financial emergencies.

And there’s a reason it’s called an emergency fund: that money should not be touched unless there’s a true emergency. A lot of homeowners were living paycheck to paycheck during the last housing bubble, and when they lost their jobs, they soon also lost their houses since they couldn’t make the monthly payments.

Work on Your Credit

If you have a spotty credit history, then your best option might be to just wait it out. While you are waiting to buy another home, you should work on improving your credit score. There are plenty of things you can do to work on your credit right now.

  • Pay your balances in full every month. Lenders like to see a low utilization rate and debt-to-income ratio.
  • Don’t apply for any other lines of credit. Too many inquiries is a red flag for lenders, since they don’t want to lend money to people desperate for credit.
  • If you’re going to close cards, don’t close any of your oldest ones. Since average age of accounts is a large aspect of your score, you could hurt your score by closing longstanding accounts.

Talk to Your Lender

A lender will be able to give you the best idea of why you can’t get a loan. If you’re constantly getting denied, even after taking all these steps, you might want to check with another lender. Some lenders will still loan to people with low credit scores, but they will charge a higher interest rate in order to account for the risk.

One alternative to traditional financing is to see what your government has available. Many governments have cheaper down payments options but they come with some sort of monthly mortgage insurance payment.

Source: http://www.foxbusiness.com/personal-finance/2014/01/16/how-to-buy-house-with-flawed-finances/

Improving Your Credit Score – Government Advice

The government is looking out for you. If you have a poor credit score then there is help but you have to be careful. This article from the Government of Canada has some very helpful advice.

If your credit score is not as high as you think it should be, make sure that the information in your credit report is correct. If it is correct, read your report carefully to find out which factors are most likely having a negative influence on your score, and then work to improve them.

Here are some tips, from the Financial Consumer Agency of Canada (FCAC), on how to improve your credit score:

  • Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
  • Try to pay your bills in full by the due date. If you aren’t able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
  • Try to pay your debts as quickly as possible.
  • Don’t go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.
  • Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
  • Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.

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