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If you're in the market for a new home, your credit score is something you will need to take into consideration. In Canada, most lenders will not provide mortgage financing to a buyer with a credit score of less than 620, though it isn't the only factor that is taken into consideration. If you have no idea what your credit score is (or that you had one!) keep reading for important information.

Canada has two major credit bureaus - TransUnion and Equifax. These agencies base your credit score on:

1. Your payment history. Have you always paid your bills on time?
2. Outstanding debt.
3. Length of credit history (how long you have used credit and the time it took to pay off).
4. Recent credit inquiries. Frequent applications for more credit can negatively affect your score.
5. Types of credit you currently have (i.e. a consolidated loan can indicate that you've had difficulty paying debt in the past).

How do credit bureaus find this information out? It is reported by your creditors. But the more important question is this: what can you do to ensure that you have a favourable credit score?

The first and most obvious step is to pay your bills on time. Generally speaking, a creditor (a utility company, bank, internet service provider or credit card company) will report a late payment to a credit bureau when it is more than 30 days overdue. Always aim to pay bills before their due date.

Don't apply for multiple credit cards. Most families can manage just fine with one credit card. Cancel any cards you don't use.

It is advisable to keep your credit card balance below 75 percent of your credit limit. Believe it or not, when it comes to your credit score, carrying a zero balance on your credit card does not have a positive impact on your credit score! Lenders want to see that you will be a profitable customer for them. This means carrying a balance on your credit card, thus resulting in interest payments. When your score has improved, pay off the balance as soon as you can.

If your credit score has prevented you from securing mortgage financing, don't be discouraged! Put your home buying plans on hold for six months and take these steps to improve your credit rating. With a little diligence, you'll be a homeowner in no time.

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Kathryn and Rob, Toronto

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