The good news is that even if your credit score isn’t as high as you’d like, there are ways to improve your chances of securing better mortgage or auto loan rates. Here are a few steps you can take to improve your credit score before applying:
- Pay Off Existing Debt:
Reducing your debt, particularly credit card balances, can help lower your credit utilization ratio and improve your score. Pay down high-interest debts first and avoid taking on new debt while you’re preparing for a loan application. - Check Your Credit Report for Errors:
Mistakes on your credit report can hurt your score. Request a free credit report from Canada’s major credit bureaus (Equifax and TransUnion) and review it carefully. If you spot any errors, dispute them immediately to ensure they don’t negatively affect your score. - Make Timely Payments:
Timely payment history accounts for a large portion of your credit score. Set up automatic payments or reminders to ensure that your bills are paid on time. Late payments can significantly damage your credit score and increase your chances of being offered higher rates. - Consider a Co-Signer:
If your credit score is low, having a co-signer with better credit can improve your chances of getting approved and may help you secure a better interest rate. Just remember, a co-signer is legally responsible for the loan if you fail to repay. - Save for a Larger Down Payment:
For both mortgages and auto loans, a larger down payment can help offset a lower credit score. A substantial down payment reduces the lender’s risk and may improve your chances of securing a better rate, especially for mortgages.
