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The Right Kind of Debt

Mortgage Broker

One of the 5 factors that go into making up your credit score are the types of credit you have listed on your credit bureau. Having different types can help showcase your ability to manage different types of debts when going in to apply for a mortgage. Here are some of the different types:

Credit Cards Lenders want to see a minimum credit limit of $2,000 as well as the fact that you use your credit and pay it back on time. Don't go overboard, even just purchasing your car's monthly gasoline on your credit card and paying it off when your statement comes out should be enough, and the longer you do this, the better.

Car Loan Banks love giving loans through car dealerships to first time borrowers. Why? Because if they treat you right, guess who you are going to go to when you are ready to ask for a mortgage loan. Getting an auto loan for a reasonable amount will truly help showcase your ability to a lender. Just try and make sure any car loans are completely paid off before applying for a mortgage!

Lines of Credit Almost like leveling up from a credit card. You will get a much bigger credit limit, and have a much lower interest rate. Plus, the minimum payments are usually interest only, making it easier to manage. Using this to make a bigger purchase and making monthly payments can show your ability to manage debt.

Student Loans

Student loans are another great way to showcase your ability for managing loans. The best part is you usually don't need to make any payments until you are out of school and graduated. They also have low interest rates and minimum installment payments, making it easier to make the monthly payments and easier to qualify for a mortgage if there is still an outstanding balance.

Cell Phone Payments

Adding automatic withdrawals from your chequing account for your monthly cell phone bills will show up on your credit bureau. This is a benefit as there aren't many types of automatic payments outside of credit that you can use to help increase your credit score.


Best way to showcase you can handle a new mortgage, show you've had a mortgage before for 2+ years with no missed payments. A lot of time when you end your initial term on a new mortgage, you can move to a new lender who may possibly be offering lower interest rates. Showing you've handled a mortgage responsibly in the past is one of the best ways to show a new lender you can handle a new mortgage with them.

If you think about it, I bet you'd feel a lot more comfortable loaning someone $300,000 if they have successfully managed debt on at least three of these levels, rather than someone who came to you with only a chequing and saving account to their name.

If you have any questions or would like to pre-qualify to see what you can afford, please click on the following link.


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