Creeping Credit - Outstanding Debts Can Really Drag Us Down
Credit is one of those things that seemingly takes on a life of its own. Fluctuating up and down, it can definitely take us for a wild ride, especially when applying for a mortgage. One of the main reasons people miss out on the house of their dreams is a low credit score while shopping. Many people struggle with outstanding debts, and it is nothing to be ashamed of, but it is something that must be managed before borrowing opportunities will pan out in your favour.
Your credit score is a big player in deciding what you qualify for and even what rates are available to you. Creditors want to know if you are going to pay them back the money you are asking to borrow from them. Ideally, the higher the credit score the better, because it means you have a fast turn around rate for paying off credit.
Bringing your score up isn't always easy and unfortunately in most cases, managing your credit score isn't something you can figure out overnight. Fixing your credit takes discipline and strategy, but once you develop healthy and consistent spending habits (which include paying down balances on a monthly basis) you will be well on your way to building up that credit score.
Credit scores are determined by a few factors seen in the diagram below.
So what qualifies as a "good" credit score, and a "bad" credit score? Reviewing a credit score where the range runs from 300 – 850, you can generally assume the following:
- Excellent Credit: 750+
- Great Credit: 700-749
- Very Good Credit: 650-699
- Good Credit: 600-649
- Fair Credit: below 600
Two ways to do patch work on your credit are to 1) reduce your credit card or line of credit balances to below 75% of your limit, and 2) get collections removed from your credit report. Make flagged collections a priority so you are removed from public records.
It's important to take care of your credit rating. Although you may not be looking to buy a house, or take out a loan today, bad credit is known to follow you for up to 6-7 years, depending on which province you live in, and a lot can change in 6-7 years!
I'm very experienced in working with clients for debt consolidation, and a big part of my job is helping my clients manage their credit scores before qualifying to buy a home. If you have any questions please feel free to take advantage of my services! And please remember, referrals are the backbone of my business, if you know someone who is struggling with debt send them my way!