How a Mortgage Can Help You Improve Your Credit Score
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When you apply for a bad credit mortgage in Toronto, you may be wondering whether or not that mortgage could inevitably help you improve your credit. It certainly can, as a matter of fact, but it all depends on your ability to make timely payments over a long period of time.
What it Takes to Get Home Loans in Toronto
In order to qualify for traditional home loans in Toronto, you will need to save a down payment and have an excellent credit score. Mortgages are some of the largest loans banks provide, so they carefully consider their risks when they lend. If you have less than perfect credit, odds are that you’ll have a hard time securing a traditional mortgage with a low interest rate. Fortunately, you can obtain bad credit mortgages in Toronto that can not only help you obtain the home of your dreams, but also help you rebuild your credit.
Private Poor Credit Loans
If you have been turned down for traditional loans, you can still qualify for private poor credit loans in Toronto. These lenders look at more than just your credit history; they also consider your employment, your income, and your debt-to-income ratio, which is the difference between the amount of money you earn and the amount of money you spend on your debts. You can get a better interest rate on a private loan if you save a down payment of 10% to 20% of the loan’s value, but even if you cannot, you can also finance the down payment.
Different Debt Types
Lenders want to see several different types of debt on your credit history in order to prove that you have a well-rounded understanding of money management. This means that you are more likely to have a high credit score if you have a mix of credit cards, auto loans, and personal loans than if you only have credit cards. A mortgage debt improves your credit mix over time, which helps to boost your score – and your credit record – tremendously. It shows future lenders that you are responsible enough to manage your money across a variety of different debt types.
How a Bad Credit Mortgage Can Improve Your Credit
Your credit history is a summary of all of your debts and your repayment history. It shows how much credit you have, how much credit you use, and whether you are currently in default with any of your debtors. However, some of this debt is considered “responsible” debt. This is what lenders want to see when you apply for a loan. A mortgage of any sort – whether it comes from a big bank or a private lender – is responsible debt. This means that if you make your payments on time every time over a year or more, your credit will improve.
A poor credit mortgage in Toronto can undoubtedly help you boost your credit score over time by providing you with a line of responsible debt and broadening your debt portfolio. In fact, many people use these loans to help rebuild their credit for a few years, then refinance their mortgages with lower interest rates down the line.