Mortgage Advice: 7 Tips for Establishing Credit

A credit score is a key factor that lenders use to determine the likelihood of repayment when considering loan or credit card applications. It’s derived from your credit reports, which contain your credit history and financial behaviour.

Before applying for credit, obtain a free credit report from each of the three major credit reporting agencies—Experian, Equifax, and TransUnion. You are entitled to one free report from each agency every year under federal law. You can order these reports online at [www.annualcreditreport.com](http://www.annualcreditreport.com) or by calling 1-877-322-8228. Review your reports carefully to ensure that no incorrect information or errors from other individuals are present. If you find discrepancies, contact the credit reporting agency to have them corrected.

To build and improve your credit score, consider the following steps:

1. Establish and Maintain Bank Accounts: Open and manage checking and savings accounts responsibly.

2. Piggyback on Good Credit: Ask to be added as an "authorized user" on someone else’s credit card account. This can help boost your credit score based on their positive credit history.

3. Co-Sign a Loan: Have someone with good credit co-sign for a loan, such as a car loan or other secured loan, and ensure you make timely payments.

4. Student Loans: Apply for student loans if applicable and make sure to make your payments on time.

5. Credit Cards: Apply for a credit card or a secured credit card and choose issuers that report to all three major credit reporting agencies. This helps build your credit history.

6. Gas and Store Cards: Apply for one gas card and one department store card to diversify your credit types.

7. Use Credit Wisely: Use your credit cards regularly but manage them wisely. Always pay your bills on time, and be mindful of your credit utilization ratio—keeping it low is beneficial.

Maintaining good credit is crucial for securing favourable loan terms, such as a fixed-rate mortgage instead of a variable-rate subprime loan. It also facilitates access to home equity lines of credit for improvements or home equity loans for consolidating debts, including student loans.