I’m trying not to start this with “you gotta have money to make money” but the urge is too strong. It’s true though and we all know it.
It’s the same with credit: you have to have it to get it.
Wait, wait. “Why do I need ID to get ID? If I had ID I wouldn’t need ID.” That’s better.
The institution financing your mortgage doesn’t know you. Your credit report is your ID. Obviously having bad credit is bad. People who have bad credit usually know it. (Are your credit cards maxed? Do you neglect to pay the minimums every month? Do you forget to pay altogether? Is someone calling you to collect? Did you have a fight with Telus 3 years ago and you moved and you figured they gave up?) But also having no credit is bad. There’s no reference to your awesome handling of the monies.
If you don’t have any reported history of you making payments on time, of you being able to manage debt responsibly, then how is the institution potentially lending you 100s of thousands of dollars supposed to know if you’ll be good for it?
YOU HAVE TO TAKE SOME MONEY AND YOU HAVE TO PAY IT BACK.
Here are some tips for repairing or generating credit so that you look good on paper.
1. Two trade lines AT LEAST. I recommend a credit card and a line of credit. Most likely your bank is salivating to get you into these products. If they aren’t, I can help. An RSP loan is good too. (Fun fact: I recently got an exception for clients who had only one trade line each but we were able to show 12 months bank statements of rent coming out and they were still qualified as AAA and got the best rate. So, exceptions can be made in the right circumstance.)
2. Total amount of available credit should be no less than $2,500.
4. Don’t skip payments and don’t be late. We all know when we get paid, right? Find out when your bills are due and set a reminder on your phone. Then make your online transfers while you’re watching the Unbreakable Kimmy Schmidt.
5. Do not max out your credit. It reflects badly if your balances are all very close to or at or over your limits. STAY BELOW 75% OF YOUR LIMITS. (If you have a $10,000 line of credit, don’t use more than $7,500.)