Advice for Credit Challenged Clients
In today’s economic climate of tighter
credit requirements and increased unemployment rates taking their toll on some
Canadians, there’s no doubt that many people may not fit into the traditional banks’
financing boxes as easily as they may have just a year ago.
Your best solution is to consult your
mortgage professional to determine whether your situation can be quickly
repaired or if you face a longer road to credit recovery. Either way, there are
solutions to every problem.
Mortgage professionals who are experts
in the credit repair niche can help credit challenged clients improve their
situations via a number of routes. And if the situation is beyond the expertise
of a mortgage professional, they can help you get in touch with other
professionals, including credit counselors and bankruptcy trustees.
If you have some equity built up in your
home and still have a manageable credit score, for instance, you can often
refinance your mortgage and use that money to pay off high-interest credit card
debt. By clearing up this debt, you are freeing up more cash flow each month.
In the current lending environment, with
interest rates at an all-time low, now is an ideal time for you to refinance your
mortgage and possibly save thousands of dollars per year, enabling you to pay
more money per month towards the principal on your mortgage as opposed to the
interest – which, in turn, can help build equity quicker.
Following are five steps you can use to
help attain a speedy credit score boost:
1) Pay down
credit cards. The
number one way to increase your credit score is to pay down your credit cards
so you’re only using 30% of your limits. Revolving credit like credit cards
seem to have a more significant impact on credit scores than car loans, lines
of credit, and so on.
2) Limit the use
of credit cards. Racking
up a large amount and then paying it off in monthly installments can hurt your credit
score. If there is a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the
balance off the next month.
3) Check credit
limits. If your
lender is slower at reporting monthly transactions, this can have a significant
impact on how other lenders may view your file. Ensure everything’s up to date
as old bills that have been paid can come back to haunt you.
Some financial
institutions don’t even report your maximum limits. As such, the credit bureau
is left to only use the balance that’s on hand. The problem is, if you
consistently charge the same amount each month – say $1,000 to $1,500 – it may
appear to the credit-scoring agencies that you’re regularly maxing out your
cards.
The best bet is to pay your
balances down or off before your statement periods close.
4) Keep old
cards. Older
credit is better credit. If you stop using older credit cards, the issuers may
stop updating your accounts. As such, the cards can lose their weight in the
credit formula and, therefore, may not be as valuable – even though you have
had the cards for a long time. You should use these cards periodically and then
pay them off.
5) Don’t let
mistakes build up. You should always dispute any mistakes or situations
that may harm your score. If, for instance, a cell phone bill is incorrect and
the company will not amend it, you can dispute this by making the credit bureau
aware of the situation.
If, however, you have repeatedly missed
payments on your credit cards, you may not be in a situation where refinancing
or quickly boosting your credit score will be possible. Depending on the
severity of your situation – and the reasons behind the delinquencies,
including job loss, divorce, illness, and so on – your mortgage
professional can help you address the concerns through a variety of means and
even refer you to other professionals to help get your credit situation in
check.
No comments:
Post a Comment