How Credit Score Affects your ability to purchase real estate in Ontario
Your credit score is a crucial factor that affects your ability to purchase real estate in Ontario. A credit score is a three-digit number that ranges from 300 to 900, with a higher score indicating a better credit history. Lenders use your credit score to determine your creditworthiness and whether or not they will lend you money to purchase real estate.
In Ontario, most lenders require a credit score of at least 600 to qualify for a mortgage. However, a higher credit score will not only make it easier to qualify for a mortgage, but it can also result in a lower interest rate, which can save you thousands of dollars over the life of your mortgage.
Your credit score is determined by several factors, including your payment history, credit utilization, length of credit history, and types of credit accounts. Payment history is the most critical factor, and it accounts for 35% of your credit score. Late payments, missed payments, or defaulted accounts can have a significant negative impact on your credit score.
Credit utilization is another essential factor that lenders consider when evaluating your creditworthiness. Credit utilization is the amount of credit you’re currently using compared to the amount of credit you have available. Lenders prefer to see a credit utilization rate of no more than 30%.
The length of your credit history is another important factor that lenders consider. Lenders prefer to see a long credit history with a mix of different types of credit accounts, such as credit cards, loans, and lines of credit.
In conclusion, your credit score plays a crucial role in your ability to purchase real estate in Ontario. It not only affects your ability to qualify for a mortgage but also the interest rate you’ll pay. It’s essential to maintain a good credit score by paying your bills on time, keeping your credit utilization low, and maintaining a long credit history with a mix of different types of credit accounts. By doing so, you can increase your chances of qualifying for a mortgage and save thousands of dollars over the life of your mortgage.
