Connect with us
Mortgage consulting services Canada

Buying a Home

3 Simple Rules to follow to ensure credit doesn’t stop you from buying a home!

3 Credit Tips you Need before you buy your next home.

For most Canadians buying a home requires a mortgage, and to get a mortgage you need credit!

Here are 3 simple rules to follow to ensure your credit is strong enough to get a mortgage!


Having your credit cards near or over the limits set by the credit card company has a negative impact on your credit score. Both Equifax and Transunion will interpret this as you “can’t manage your money” and will assume you have to rely on credit to maintain your lifestyle.

Always try to only use 30% of the available limit of your credit card or any revolving credit product.


Credit Card Limit – $5,000.00 X 30% = Recommended Maximum Use $1,500.00

The financial industry refers to this calculation as the Balance-to-Limit Ratio or Utilization.

Watch out for this: If you use your all of your available limit every monthYou may be surprised to learn that even if you pay off your credit card or line of credit every month if the bank reports to the credit

An easy guideline is to never go over the 50% mark of your limit.

TIP: Do not close a credit account! Closing an account and increasing the limit on another means you could be using a higher percentage of your total limit. Closing a credit account is a red flag on your credit report.


While this rule is an obvious one, it’s one of the more important rules for keeping your credit score high. Missing a payment shows up as a black hole on your credit score and it tells lenders that you could miss a mortgage payment, making you a riskier investment.

If you’ve missed credit card payments, it is not the end of the world. There are still options to saving your credit.

Read our blog post on how to recover from bad credit: 3 Steps to Repairing your credit history

TIP: The best credit score comes from showing good habits over a long amount of time. Paying off your credit card balance every month gives you the best credit score.


What is a trade line?

A trade line is a credit account that credit reporting agencies pull up when your credit is being examined.

It is best to have a few types of trade lines. This shows that you can handle different types of credit. However, this only applies when you are responsible for all of your trade lines! If you have 3-4 trade lines and they all have a high balance-to-limit ratio, this hurts your credit.

List of acceptable trade lines:

    • Personal loan/Car loan 
    • Credit card 
    • Personal line of credit 
    • Mortgage (some mortgages don’t report to the credit bureau)

It is best to have a combination of any two of these and for each to be a minimum loan or lending limit of $5,000. This gives you a diverse credit history, with at least $10,000 of credit under your name.

Lenders will look at your credit report and see that you have the responsibility of different trade lines that you can manage by making the proper payments and not needing to go near your limit.

TIP: Don’t go overboard on applying for credit. Applying for a few trade lines in a short amount of time is another red flag. It is better to slowly build and grow your credit history over an extended period of time.


I will keep showing you the details you need to know about your next mortgage, through my blog posts and emails (if you have registered to receive them) but if you want to skip to the finish line you can book a phone call and I can put my experience to work for you right away.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Connect with us Facebook

Recent Posts

Contact Us