Put yourself in a bank or lender’s shoes. Someone comes into your branch and asks you to politely loan them $300,000. You are a big bank, but $300,000 is still a lot of money. How do you ensure this person is going to pay back the money you loan them, on time, and in the right amount? Look at their record for borrowing other people’s money.
This is why taking on different kinds of debt when you are young is a good thing, but it must be within reason.
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.
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.
I bet you’d feel a lot more comfortable loaning someone $300,000 if they have successfully managed debt on all three of these levels, rather than someone who came to you with only a chequing account to their name. If you have any questions, a Dominion Lending Centres mortgage professional near you.