The impact of your credit

HOW CREDIT IMPACTS YOUR LOAN

The higher your credit score, the more mortgage options you are likely to be offered and the more likely you are to qualify for a lower interest rate. When you apply for your loan, we will look at your credit score from each of the three major credit agencies: Equifax, Experian and TransUnion. For the purposes of your application, we’ll typically take the middle score. If you are applying with another person, we will take the lower middle score of the two.

Scores generally range from 300 (lowest) to 850 (highest). For most lenders, a good credit score is considered to be 700 or above. A credit score under 620 could make it harder to qualify for a mortgage, but there are still options available, such as an FHA loan. This is a government-backed program that offers fewer restrictions on your down payment and qualifying credit score than conventional mortgages.

Learn more about credit:

HOW YOUR CREDIT SCORE IS CALCULATED

To calculate your credit score, credit agencies will typically take into account 5 key factors. The importance of each factor can differ depending on your specific circumstances and credit history.

PAYMENT HISTORY

This takes into account how consistent you've been in paying off your debts. The more timely your payments, the more confidence a lender will have in you repaying your mortgage.

AMOUNTS OWED

This is the amount you still owe on each of your accounts compared to the available credit you have. Owing too much will lower your score, especially if you're approaching your total credit limit.

TYPES OF CREDIT HISTORY

Your credit report will list the number and various types of accounts under your name. This includes everything from credit cards and loans to retail accounts and car payments. If you are a joint account holder, or an authorized user, this will also appear on your report

LENGTH OF CREDIT HISTORY

This part of your credit report analyzes the time since your accounts opened and the time since you last used each account. The longer your established history, the higher your credit score

Every time you apply for credit or open a new account, an inquiry is added to your report. The more inquiries you have, the lower your score. Activity on joint or co-signed accounts will also impact credit scores. For example, if you co-sign for a relative and they default on their payments, it affects both of your scores.

You can access the 3 major credit agencies online to check your credit report and score. If you find any mistakes that need correcting, it's best to contact the credit agency as soon as possible.