The Importance of a Good Credit Rating and What you can do

Good credit versus bad credit


When preparing to buy a home, a strong credit rating is an important factor in obtaining financing. Lenders will look at a borrower’s credit record and credit score to evaluate their willingness and ability to pay their debts.

A good credit rating is achieved by paying all bills on time. It’s important that consumers understand this includes not only their credit card statements, but also all other regular expenses such as taxes, hydro, gas, cable, telephone and so on. Late or missed payments are reflected on a credit report and can lead to longer-term problems that impact an individual’s credit rating. The goal should be to demonstrate a track record of paying all bills on-time and in full.

A borrower’s credit score, along with their credit profile, will be reviewed by individual lenders to establish credit worthiness. A low credit score can affect that individual’s ability to buy a home quite severely because there is a minimum score required.  According to Canadian government regulation, 600 is the lowest score you can have to qualify for a mortgage. It’s important to note, however, that many insurers will not even go that low depending on other criteria, such as the amount of the down payment. Going into a home search with a credit score of 650 or higher is a good start.

Encourage your customers to review their own credit report and score before applying for a loan. This will allow them to uncover any errors or signs of fraud. For a small fee, a credit bureau (Equifax or TransUnion) will provide an instantaneous online report that details current debts and payment history. The report includes information on what the score level means, how it compares to others and how it can be improved. The report can also be requested by mail for free.

If your customer’s credit rating is scoring on the lower end, you can encourage them to not give up and provide guidance on how to improve their score. By paying down existing debts and making sure future bills are paid on time, they can see their rating improve and still be on their way to achieving their homeownership dreams.

Other advice you can offer is suggesting they avoid major purchases or postpone them until they have saved up enough money. Vacations or other non-essential expenses should also be minimized. In general, anyone who wants to improve their credit profile should live within their means and control their spending habits if they truly want to become a homeowner.

Credit to: KiKi Sauriol-Roode

Kiki Sauriol-Roode is VP, strategic alliances for Genworth Canada. For more articles and videos on advice for first-time homebuyers, visit

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Cheryl Sebrins

Cheryl Sebrins

Sales Representative
CENTURY 21 Today Realty Ltd., Brokerage*
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