Calgary Lifestyle Guide

Canadian Credit Score Explained 101 | What Credit Score You Need to Buy a House in Calgary

• Anastasia Dvorak • Season 1 • Episode 2

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The Most Complete Guide on Credit Scores in Canada | Getting a mortgage? Do late payments affect your credit? How to build your credit? Learn about it all here.  

▶️ Read the full blog post on this topic on my blog: https://calgarylifestyleguide.com/the-best-credit-score-guide-for-canada-how-to-get-a-good-credit-score/

Links Mentioned in the video:
https://www.creditkarma.ca/
https://borrowell.com/
https://www.equifax.com/personal/
https://www.transunion.ca/

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Hi! I am Anastasia. I am your Calgary Lifestyle Guide. This podcast is all about down-to-earth advice on moving to Calgary, living in Calgary, and buying/selling properties in Calgary.  I am a local Real Estate Agent/Calgary Realtor with CIR REALTY and YYC Lifestyle Blogger and YouTuber. 

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Anastasia Dvorak
Real Estate Agent/Realtor
CIR REALTY, Calgary, Alberta
Serving Calgary and the surrounding area
Text me: 403.835.6913
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Hi everybody. My name is Anastasia Dvorak I'm your Calgary Lifestyle Guide. Welcome to my channel. I am a Calgary Realtor and I'm a blogger and I love teaching you guys about Calgary and giving you advice on how to move to Calgary and how to buy your first home. So today we're talking about how to get the best credit score in Canada. What is the best credit score? How to get a mortgage? And there are nine topics we will discuss today and you will see in the description I left you guys all the timings, and you can click on the specific topic and learn more. Please stay until the end. And if you find this information useful, feel free to subscribe and follow me on instagram and let's get started. So why are we talking about credit scores today? Credit scores have a huge impact on your financial future because the interest rate that you're given will save you thousands of dollars in the end, if it's a good one or you will lose a lot of money if it's not a good one. But how? How and why is credit score so important when it comes to mortgage application, we need to discover this. So let's get started. So what is a credit score? In Canada, lenders determine your financial health and your ability to repay a debt and pay your bills by looking at your credit. Score. Credit score usually ranges from 300 to 900 points, and there are five categories that are assigned to each score. Fair, poor. Very good. Good sorry. Fair, poor, good, very good and excellent. And obviously the higher it is, the better it is for you. lenders prefer that you have a higher credit score, for example, over 650 points, because that means that you're a good candidate for a credit product. It means you're paying your bills on time. It means that your credit history is in good state. Obviously, if your credit score is 750 over, that's even better for you. In Canada. Lenders not only look at your credit score, but they also look at your credit report. In your credit report, they will see how many credit cards you've ever had. If you ever miss any payments and the length of your credit history is also very important, especially when you're applying for a mortgage or credit product. Let's discuss why credit score is so important. So why is credit score important in Canada? Many newcomers and young people who are not well-versed in the financial matters think that I don't need a credit card. I don't need a loan I don't want to. I don't want any debt. People just hate debt, and I understand. I agree with you. However, in the eyes of a lender, they don't understand what kind of person you are. They want to see that you are. They want to see that you have the ability to pay your bills on time. The only way to show them that is to have an active, credit history. This is a major issue because I've seen people who are trustworthy, smart people who don't want any debt. But when they're trying to get a mortgage, they have zero credit history. They have to pay everything upfront. When they're buying a car, they cannot finance it. When they want to buy a phone, they have to pay $1000 up front to get a phone because they have zero credit history. Lenders want to know that you're able to cover your debt to pay your payments on time to pay your bills on time. And that's why you need to have an active credit history. I know you don't want to be in debt, and you don't need to be in debt I'm not telling you guys to get 10 credit cards and go shopping. No, at maximum, you should have 2 credit cards where you utilize only 30% of your limit. Okay, but you need to have the credit history. You need to do this because I want you guys to get the best mortgage rate. And in order to get the best mortgage rate, you have to have a high credit score. And for that you need to have a good credit history that's active. Okay. One thing to remember is, if you don't have any credit history, the lender does not trust you. That means you will not get any favourable interest rates. You will have to pay for everything up front, and that's not cool. So how can you check your credit score and is it free? So the first thing I need you to know is there 2 credit bureaus that are in Canada, Equifax and TransUnion, and you can check your credit score for free by calling them or writing them a letter, so that may take some time. The easiest way that I recommend is going to creditkarma.com Sorry, creditkarma.ca And another website is borrowell.com where you can check your credit score for free. They will send you emails in exchange for that advertising various credit card products. But just ignore them. You can put them into junk folder or whatever just the fact that you have access to your credit score, even though it might not be the most accurate one. But it still gives you a perspective on what it is and what you should be working towards to. it will show you your active debt accounts if you have credit card debt. If you have line of credit debt, it will show you every single credit card you've ever had. Every single thing you've ever leased or financed - it will be there. If you see something that's not right, it might be a sign of identity theft, so Please, guys, be careful. Check your credit history every six months, or maybe every three or four months if you are more paranoid like me. But please do that because you don't want to handle identity theft. The other thing I wanted to mention to you guys is that checking your own credit score does not lower your credit rating. Sometimes when the credit institution checks for your credit score or with your consent, they get access to your credit report You get a hard or soft inquiry, which we will discuss later, so the hard inquiries impact your credit. The soft ones do not. So when you do, check your own credit. There's zero impact on your credit score. For example, when when you're applying for a mortgage, a mortgage professional will ask for your consent to check your credit report. That's what they mean. They want to get access to your credit report. They want to get your credit score, and if you give them permission, they will do that. Please be aware that if you're shopping for a mortgage, please let a mortgage professional know not to do a hard inquiry. Okay, because sometimes you......if they think that you're interested and you're going with them, they will do a hard inquiry, which is not good for your credit. So make sure before you kind of go ahead with your mortgage professional shop around and tell them not to do a hard inquiry. You just do soft inquiries, okay? And we will discuss all of that in thIS video a little bit later. So how to build your credit history and get your dream home? I think it's a very, very important topic because it's important to build your credit history. It will benefit your family in the long term, and you will get the best interest rates. Even one point difference in interest rates can save you so much money, guys, seriously, I'm not telling you to get 10 credit cards and go shopping. I'm telling you to get maximum two credit cards and use no more than 30% of the credit card limit because by being a conscious consumer who is paying their debt on time, you show the lender that you are good, you're responsible, you will be able to handle this mortgage, and that's why they are more willing to give you a better rate. And by consistently paying attention to your credit report, you will be on your way to the best credit score possible. The lender will not only look at your credit score, it will also look. If you've ever missed any payments and those payments stay on your account for seven years. Yes, they do. So please pay attention to your credit score and please pay your payments on time. This way you will build your future and you will get your dream home. One more tip for you guys. When you're shopping for a credit card, please ignore their top selections and ask for the lowest interest rate card. They don't advertise them, but every bank has one. It's the lowest interest rate card they have. It might not have any fancy rewards, or it may cost a little bit less or more per year, but it has the lowest rate. Okay, and you will not get any rewards or travel points. But it doesn't matter. You will be paying, you know, 9-10% interest versus 20% interest. Okay, that makes a difference in your monthly payment. So please shop around. So what Credit score Do you need to get the best mortgage in Calgary, Alberta? That truly depends on the lender, but ideally, your credit score should be between 620-680 or higher. And by the way, that's my son. So please ignore him. The lower your credit score, the more likely that you will get the least favorable rate. And it will definitely cost you in the long run, so I would recommend to take time and actually improve your credit score. Do late payments affect your credit? Yes. If you don't pay your bills on time, there might be a problem. If you don't pay your bill on time, eventually the bank or the lender or the credit card company or insurance. They would get in touch with the company called Collections Company, and that company will call you and try to get the money back from you, and eventually, that will definitely decrease your credit score. If you think that you're gonna be late paying your bills, call the lender. Call the bank, let them know because you don't want your credit score affected. So now let's talk about what is a hard credit check and what is a soft credit check. So when you're applying for a credit product like a mortgage or an auto loan or something else, or a credit card, the bank or the financial institution, they need some help in their decision making. So they make an inquiry into your credit report. That means that a hard inquiry is happening because it's connected to your credit application. Hard enquiries to stay in your account for two years, but their impact lessens over time. A soft inquiry is when you are checking your own credit report or when a bank is trying to pre-approve you for a couple of credit products. This is a soft inquiry. It does not affect your credit score, and it's nothing to worry about. It still stays on your report, but it has no impact. And don't worry about it. Okay, what you should worry about is hard inquiries For example, this is one of the biggest mistakes that I see in our industry. People are buying a house, and in the middle of the mortgage process, they decide to buy a car so they go finance a truck. Okay, this is a no-no because your credit score is going to be reduced because there's an additional hard inquiry in your account, and that's not good for your mortgage. If you're going to lose points on your credit score, your mortgage interest rate is going to change, and that can affect that can affect a lot of things. You can lose thousands of dollars. You can end up paying so much more. So, guys, please. When you're buying a house, please don't get multiple credit products. Please don't buy a car. Okay, you can buy it later when you move in. Okay, just don't do both things at the same time. Okay, that's my advice to you. So let's talk about the existing debt. For example, if you have a student loan, if you have an auto loan or some other loan, should you pay off his debt first and then apply for a mortgage? Or should you just focus on your debt? I think you should focus on repaying your debt because the less debt that you have, the more money you have to put towards your mortgage payment, and that's what the lenders want. They don't want you to have too much debt, and if you are spending money on paying off your student loan, your car loan and then your mortgage. You have less money for food and for your family and to the lender. That's a problem. Okay, because they want to make sure that you pay your bill on time. So if I were you, I would focus on improving your credit score and reducing your debt. Let's talk about improving your credit score. What do we have to do to improve it? So there are a couple of things that I want you to do. First of all, don't get credit unless you truly need it Do not get 10 credit cards. Get two or one ideally, and don't hold a lot of balance on it. Try to keep it max 30% of the credit card limit. So if you have a $10,000 limit, have only $3000 of balance on it, that you will be paying off. Okay, because if you do more than that, then that will definitely reduce the credit score. Pay your bills on time, be punctual. Set an auto payment with your bank. Please don't miss your payments. Okay. The other thing is make sure that you're reviewing your credit report every six months or less. Make sure there's no identity theft going on and make sure that you can track all the hard inquiries and the soft inquiries. And if there is a mistake, you can handle it and contact the bank and ask them to remove the inquiry. If this was a mistake, it's super important to shop for the lowest interest rates. When it comes to your mortgage product and your credit card products, you have to shop around, especially when you are getting the mortgage. There are so many different options. Don't get stuck with one financial provider. Shop around, compare rates and negotiate, and I will talk about this more in my next video. Also, do not apply for too much credit in a short period of time and don't carry too much debt. Okay, and I know that this is a lot of information, and there's if there's like if you're too tired for this and you just want one thing to remember, please pay your bills on time. Do not have missed payments because that will definitely affect your credit score. So now we've covered a lot of information about credit scores. And if you have any questions, please put them in the comments again. Thank you guys. So much for watching. If you have any additional questions about real estate of mortgages, please get in touch with me. My contact information is in the description. Thank you guys. So much for watching. Please subscribe, and I'll see you next time!

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