Posted by: islamicfinancingnews | October 17, 2012

A good credit rating is part of Islamic loans

Having good credit can increase your options when it comes to obtaining proper Islamic loans free from Riba.  A few months ago, the Bank of Canada and the Finance Minister restricted mortgage lending rules in an effort to keep Canadians’ real estate borrowing and spending to a minimum. Despite advising Canadians to exercise caution given the high level of household debt and expected interest rate hikes, revised figures recently released from Statistics Canada reveal the debt-to-income ratio has risen 1.8% in the second quarter of this year to reach 163 percent.

A debt-to-income ratio or DTI indicates how much of your income goes towards paying monthly debts and experts say about 70 percent of household credit is related to your mortgage. Although Statistics Canada indicate the latest figures are more in keeping with international accounting standards for measuring household net worth, the numbers are significant given that Americans’ household debt-to-income ratio reached similar levels prior to the housing bust and financial crisis in 2008.

A good credit score is essential to proving to your lender that you are financially responsible and a low risk type of borrower when you are applying for Islamic mortgages. Following a few common sense rules such as keeping credit applications to a minimum, staying within or below your credit limit on credit cards and paying bills on time will allow you to build and maintain a good credit rating.

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