Mortgage renewal is an open window that allows you to reassess your home loan and secure better terms. One key factor that influences the terms you receive is your credit score.

This blog will briefly explain the concept of credit scores, how it affects your mortgage renewal, and the steps to prepare for the process.

What is a credit score?

A credit score is a numerical range of 300 to 900, which is calculated based on various factors in your financial history, such as payment records. For instance, when bills are paid timely, this increases your credit score, while missed or late payments can lower it. 

The length of your credit score history is another factor, with longer histories leading to higher scores.

In Canada, a credit score of 760 and above is considered excellent, and anything between 660 and 760 is ranked as fair to very good. These scores show that you can manage your credit well, and a mortgage lender will feel comfortable to borrow the required funds at a competitive rate. 

However, scores between 300 and 659 are considered poor. During mortgage renewals, lenders will consider you as a risk and may require you to pay higher mortgage rates.

The Role of Credit Scores in a Mortgage Renewal

It is not news that a higher credit score signals to lenders that you are reliable, which can lead to favourable terms, such as lower interest rates, better loan options, and greater flexibility. 

Conversely, a low credit score indicates greater risks, thus resulting in higher interest rates, stricter terms, and possible difficulty in securing a mortgage renewal. 

Additionally, credit scores affect the availability of mortgage products during renewal. For instance, a strong credit score might make you eligible for more favourable fixed-rate or variable-rate mortgages, offering lower interest rates and better terms. With a higher score, you also have greater leverage to negotiate better renewal conditions. 

On the other hand, a lower credit score may limit your options and lead to higher costs. Lenders are usually more cautious with low credit scores, hence it is essential to maintain a strong score for better mortgage renewal terms.

How to Improve Your Credit Score Before a Mortgage Renewal

Below are some easy yet effective steps that can help you improve your credit score before your next renewal:

  • Consistently pay all your bills on time, as payment history is the most influential factor that reflects on your score. 
  • Reduce your total debt, particularly credit card balances. Aim to keep your credit utilization ratio below 30%.
  • Avoid applying for new credit in the months leading up to your mortgage renewal, as multiple credit inquiries can temporarily lower your score.
  • Regularly check your reports from credit bureaus for errors. Mistakes on your credit report, inaccurate account information, or late payments can lower your score. 

Implementing these steps well in advance of your mortgage renewal can help you position yourself for lower interest rates and better mortgage terms.

Call Us Today for Help With Your Mortgage Renewal

Maintaining a strong credit score is essential for securing favourable mortgage renewal terms, including lower interest rates and better loan options. 

While many rate comparison websites and platforms provide useful insights when shopping for options, they can lack real-time updates and sometimes mislead homeowners into believing they qualify for products they might not. 

Northwood Mortgage, the best mortgage broker in Ontario, is well suited to guide you through the required steps to improve your credit score, position yourself to leverage better offers, and understand negotiation tactics for flexible rates.

You can call us at (416) 969-8130 or contact us online for a personalized and solution-driven experience.