Bruised Credit Mortgage Approval Options

5 Steps to Eliminate Your Bad Debt and Acquire More Good Debt

Step 1 – Stop accumulating bad debt. What ever you purchase via credit cards must be paid off in full at the end of each month. No exceptions.

Step 2 – Make a list of all your consumer(bad) debts. This includes each credit card, car loans, school loans, and any other bad debts you have acquired.

Step 3 – Refinance your mortgage to consolidate your high interest debts. Chances are you’ve built up enough equity in your home to pay off your high interest credit cards and consumer loans. Dominion Lending Centres Westcor can help determine how much equity is available and how much you can save by increasingyour mortgage balance to pay off bad debts at lower interest rates.

Step 4 – Explore the option of using additional equityin your home to increase cash flow. After you consolidate your bad debts you may still have equity left overto invest in a secure cash flow producing asset. For example, the equity could be invested in a First Mortgage Fund that earns 9% interest. With a home mortgage interest of5% the net return on this investmentwould be 4%. That return can be leftto compound or withdrawn every month.

Step 5 – Pay yourself first. Put aside a set percentage from each paycheck or each payment you receive from other sources. Deposit that money into an investment savings account. Once your money goes into the account, NEVER take it out, until you are ready to invest it. Now- instead of just paying creditors-you’re paying yourself for only one type of purchase: assets that give you positive cash flow each month. By adopting this as a consistent habit you will be out of the Rat Race faster than you ever dreamed!

Your Credit report

A good credit report and credit score are important factors in determining whether or not you will be approved for a mortgage. Here are some simple steps you can take to maintain a good credit history — and improve your chances of being approved.

What is a Credit Score?

Your credit score is a number that illustrates your financial health at a specific point in time. It also serves as an indicator of your financial past, and how consistently you pay off your bills and debts. This is one of the factors mortgage professionals consider in qualifying you for a mortgage.

How to Check Your Credit Score

To find out your credit score, contact Canada’s two credit-reporting agencies:

Equifax Canada at www.equifax.ca
and
TransUnion Canada at www.transunion.ca

For a fee, these agencies will provide you with an online copy of your credit score as well as a credit report — a detailed summary of your credit history, employment history and personal financial information on file.  You can also obtain a free copy of your credit report by mail. If you find any errors in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy immediately.

If You Do Not Have a Credit Score

It’s important to begin building a credit history as early as possible. You can begin to build one by applying for — and responsibly using — a credit card. Your financial institution or mortgage professional can help.

How to Improve Your Credit Score

Demonstrating your ability to manage credit is key to maintaining a good credit score. There are a number of things you can do to improve your credit score. These include:

  • Always pay your bills in full and on time. If you cannot pay the full amount, try to pay at least the required minimum shown on your monthly statement.
  • Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible.
  • Never go over the limit on your credit cards, and try to keep your balances well below the limits.
  • Reduce the number of credit card or loan applications you make.

Once your credit score has improved, work with  Dominion Lending Centres Westcor to obtain a mortgage that works for you.

Find Out More

To find out more about credit scores and reports, visit the Financial Consumer Agency of Canada website and download or request a free copy of their guide, Understanding Your Credit Report and Credit Score.  This guide provides practical, straightforward information on how to obtain and understand your credit report and score, as well as how to build and maintain a good credit history.

Article provided courtesy of CMHC

Dominion Lending Centres Westcor 114 1212 1st ST. SE, Calgary, Alberta. Phone: 403-228-7800. .