5 Critical Tips for Self-Employed Homeowners to Maintain Good Credit in Canada
Being self-employed has many perks, like setting your own hours and being your own boss, but when it comes to maintaining good credit, it can be a little more challenging. If you're a self-employed homeowner in Canada, here are 5 essential tips to help keep your credit in tip-top shape, so you can access the best mortgage rates, credit lines, and financial opportunities when you need them.
1. **Separate Personal and Business Finances**
As a self-employed homeowner, it's easy to mix up your personal and business expenses, but keeping them separate is critical. Open a separate business account, use different credit cards for business and personal spending, and keep detailed records of all transactions. This helps avoid confusion and ensures that your personal credit score remains accurate and unaffected by business cash flow issues. TIP: If you have a car lease or loan that is used for business have loan payments come from your BUSINESS account
2. **Pay Your Bills On Time**
Timely payments are the foundation of good credit. Late payments can have a significant impact on your credit score, even if you're self-employed. Set reminders or automatic payments for all your bills or setup auto minimum monthly payments for credit cards, and utility bills. Staying on top of payments not only prevents late fees but also builds trust with lenders, showing you're responsible with your finances. NEVER EVER be late on a mortgage payment!
3. **Keep Credit Utilization Low**
Credit utilization is the amount of credit you’re using compared to your total credit limit. Experts suggest keeping your credit utilization below 30%. If you're frequently maxing out your credit cards, it can harm your score, even if you're paying the balance off every month. As a self-employed individual, lenders may scrutinize your credit more closely, so aim to keep your balances low to maintain a healthy credit score. TIP: get your limit increased if you are getting close to it.
4. **Regularly Check Your Credit Report**
It's crucial to stay aware of your credit score and the factors affecting it. Request a free credit report from one of Canada's credit bureaus, Equifax or TransUnion, at least once a year. Review it for errors or discrepancies—mistakes like incorrect debt amounts or missed payments can damage your score. As a self-employed homeowner, staying proactive helps you spot and correct issues before they become major problems. TIP: I have fast access to correct any issues with credit bureaus
5. **Build a Strong Credit Mix**
Having a variety of credit accounts—like a mortgage, credit cards, and lines of credit—demonstrates to lenders that you can handle different types of credit responsibly. Aim for a balanced approach, where you manage a mix of credit options over time. This strategy can give your credit score a boost, and as a self-employed person, it's a great way to show lenders you're financially well-rounded. TIPS: Easy Financial and those kinds of lenders are considered "desperate money" to lenders. Avoid if you can.
Final Thoughts
Maintaining good credit as a self-employed homeowner is key to unlocking future financial opportunities, from securing favorable mortgage rates to accessing credit for business investments. By separating your finances, paying on time, keeping credit utilization low, checking your report regularly, and managing a strong credit mix, you'll be well on your way to financial success!
Need help improving your credit for a mortgage? Get in touch today for expert advice on securing financing for self-employed homeowners!
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