Best credit score to buy a house:
Top three tips!
Ever wondered what your credit score should be to qualify for a mortgage?
Do you get a better rates if your credit score is higher?
Well, these are all common questions and if you've been wondering these throw yes down
in the comments below.
Now as a mortgage broker for the last 10 years, I've helped countless amount of people get
approved for their mortgage and help them find a home.
In this video, we're going to go over things like what is a credit score, and
what is on a credit score, what is a credit score made up of, what credit scores lenders are looking for?
And at the end, I'm going to have my top three tips including how to increase your credit
score so that it's most appealing to lenders and you don't want to miss that.
So let's get started.
What is a credit report?
Well, it's a summary of how you've handled all of your credit accounts.
It's got your types of accounts on there, your payment history and other information
that lenders and creditors have been reporting.
Now in Canada, there's two main companies for credit reporting agencies.
It's Equifax and TransUnion.
What is ON a credit report?
Well, it's got your identification information, so things like your full legal name, your
sin number, date of birth, your address.
It also has your credit history.
So the types of accounts that you have, credit cards, lines of credits, the balances, their
credit limits for them, and your payment history.
It's got inquiry information there as well, which, has your hard credit checks.
Now it's important to know that there's two different types of credit checks.
There's a soft credit checks, which is to credit checks that you perform on yourself.
You can do this as many times as you'd like
and it will never affect your credit.
Hard credit checks are from, uh, institutions or companies that want to check your credit
score, to be able to offer you the products and services that they have.
So it's important to know that if you have a lot of credit checks, hard credit checks
in a short period of time, it does negatively affect your score.
Now, it also has other things such as your bankruptcies and collections.
What is your credit score made up of?
Now, this is VERY important to understand, so pay close attention because if you understand
this, then you'll have a better idea of how to increase your credit score in the future.
So there's five different factors that make up your credit score.
The first and biggest one is your payment history.
This makes up for 35% of your score and it basically shows the lender that, uh, your
ability to make your payments on time at the end of every month.
The second factor is used credit versus available
credit.
Now this makes up for 30% of your credit score.
And what this means is you want to make sure your balance is lower, typically within 30%
of what your limit is.
If you do that, your credit score will be better.
The third is your credit history and this accounts for 15% of your credit score.
Now, this takes into account how long you've had your credit accounts for.
The longer you've had them, the better it is because lenders want to see that you've
been responsible over a period of time with your finances.
The fourth is public records.
Now this accounts for 10% and this shows any prior history of bankruptcies and or collections.
And the fifth one is inquiries and this makes up 10% of your credit score.
And this is when you really apply for other credit accounts and it's considered a hard
credit check though.
So you want to make sure that you don't have
too many of these inquiries in a short period of time or else, like I mentioned earlier,
it could negatively affect your credit score.
What credit score are lenders looking for?
Well, lenders and insurers are looking for a minimum beacon score of 600 now if it's
less than 600 then you may have to look at alternative lenders or what we call B lenders.
If that's the case, there's usually fees involved and higher rates.
Now you'll qualify for a bigger mortgage if your credit score is 680 or higher.
Now, contrary to popular belief lenders will not give you a better rate if your score is
higher than 680 but it provides a stronger application, which means you have a higher
chance of getting approved.
So the best credit score to buy a house is 680 or higher.
We've gone through quite a bit of information,
so if you ever want to rewatch this video in the future, hit the like button and
the save button and that way you can always refer back to this information.
Now let's get into my top three tips.
Tip number one, get started on the preapproval process long before you think you're even
ready to buy.
The reason why you want to do this is because lenders typically want to see two types of
credit for a minimum of two years each.
And if you have bruised credit, then it gives you time to fix it.
There's a lot of things that you need to know about the mortgage process and it never hurts
to get educated on it far before it actually happens.
Tip number two, work with a mortgage broker.
Now, I'm not trying to be biased, but I kind of have to be
Here are the facts.
If you want it to get a preapproval at different banks to see what rates they will offer you,
you're to have to make three appointments, drive to three different banks, fill out the
application three times and see three different people who wants to do that?
Plus, if you remember what I said earlier about hard credit checks, if you have a lot
of inquiries in a short period of time, it will negatively affect your credit score.
Mortgage brokers only need to pull your credit once and they can shop your application with
all the lenders that they work with.
No driving around multiple times or wasting time.
Tip number three, how to increase your credit score.
Now remember what we mentioned earlier of what makes up your credit score.
It's your payment history, 35% of your score and your used credit versus your available
credit 30% now it's super simple.
Guys pay your bills on time and use your credit
cards or lines of credits a once a month so that it gets reported as an active credit.
Now schedule and reminder, put it on your phone, on your computer, ask your dog, make
sure you schedule a reminder five days before the actual due date.
Now the next part is keep your balances to no more than 30% of your available limit.
Did you guys find all that helpful?
If so, type in yes down in the comments below.
And if you like more tips on the mortgage and real estate side, hit the subscribe button
and the notification bell so you know when our videos will be coming out next.
We have videos coming out every week and we would love to answer any of the questions
that you might have.
Just throw them down in the comments below.
So thanks for tuning in guys.
My name is Felix Chan with the LiveInnerCity real estate team helping you keep real
estate simple and we'll see you in the next video.