Posted on May 01, 2015

Simple Steps to Maintain a Healthy Credit Score - Your Mortgage May Depend On

Creditworthiness is a key factor in how much you’ll qualify to borrow for a mortgage. Applicants with high credit scores and good credit reports gain access to better rates and a wider range of mortgage products.

A “credit report” is a detailed history of how consistently you meet your financial obligations, such as loan, bill and credit card payments. A “credit score” is a number between 300 and 900. The higher the number, the better, explains mortgage broker Dustan Woodhouse. He points out that few lenders will accept an application from someone with a score below 600, and self-employed applicants generally need a score closer to 700.

“At minimum, you want to have at least two trade lines (such as a credit card or a line of credit), each with a limit of at least $2,500, to establish a meaningful credit rating,” says Woodhouse. “Lenders want to see that you’ve been given enough room to get in trouble, but haven’t done so.”

For a stronger score, Woodhouse recommends having three to five trade lines with limits of $5,000 to $10,000. This establishes “depth of credit” and shows you’re able to manage credit well.

Maintaining a healthy credit score is relatively simple. Woodhouse offers several easy-to-follow tips:

Check your credit report regularly: Watch for issues or mistakes on your credit report by ordering it free of charge from Equifax ( If you want to know your credit score, you can order a more comprehensive report for a fee.

Resolve disputes: If there’s an issue on your credit report, take care of it right away. “It’s great to be morally right in the dispute, but little things like the gym membership that you didn’t cancel and got sent to collections, or the parking ticket you didn’t pay, can devastate your credit rating,” says Woodhouse. Paying outstanding bills can often bump up your credit score in as little as 90 days.

Pay your bills on time: While it’s good practice to pay your credit card off each month, only your minimum monthly payment counts against your credit. Most credit card companies offer a direct-debit option to automatically withdraw the minimum payment from your bank account each month. Signing up for this is a “no-brainer” to preserving your score, says Woodhouse.

Steer clear of your limit: While carrying a balance does not necessarily affect your credit score, be wary of carrying too much, warns Woodhouse. “It’s safe to say that if you carry 75 per cent of your credit or reach your limit, that’s negatively impacting your score.”

Originally printed in Mortgage Broker Consumer Guide 2015