To get a mortgage, you'll need to have a stellar credit score
When you begin shopping around for a mortgage the importance of your credit history and score becomes evident.
Your credit score is an important item that will determine what interest your mortgage agent will be able to offer you. It should be a priority because it can save you thousands of dollars. If you take care of your credit, your credit will take care of you! Whether you have had credit for a long time or are completely new and just beginning, the reality is that you will have to at some time or another prove that you are a low enough risk for lenders to lend to. If you are just beginning to build credit a good way is by using a credit card.
What is a credit report?
A credit report is a quick look into your credit history. If you have taken a loan or used a credit card you will have a credit history. Financial institutions, trust companies, credit companies and grantors that give you credit may send information about whether or not you make your payments on time to a credit-reporting agency/bureau.
Credit bureaus collect information about you and how long it takes you to pay back money you have borrowed. This is is called your credit history.
Credit lenders rely on a credit bureau to analyze an applicants current and past credit history in order to determine the likelihood of future repayment. This provides a fairly accurate indication of future repayment trends.
The two most popular credit bureau agencies operating in Canada are Equifax and Transunion. You can request your credit report by mail for free but your score is not included. If you request your credit report online a fee is charged and your credit score is included.
You are the only person who can see your credit report. No one else can access the information in your report unless you allow it. Generally you would allow credit checks to organizations you are applying to for credit. Usually you sign documentation allowing them to do so.
Whats in your credit report?
Personal information such as:
current and previous addresses
S.I.N., phone number
date of birth
Financial information such as:
lines of credit
loans and mortgages
bankruptcies, court judgements and backed secured loans which are considered public records and debt that was referred to a collection agency for payment.
A list of credit report inquiries: You, your lender, or any other authorized agent is also included which is usually used to determine if you are a credit seeker: someone who applies for a lot of credit.
How are you rated?
The credit agency describes your credit history by rating it. A scale of 1 to 9 is used with 1 meaning that you pay your bills within 30 days and 9 meaning you have bad debt, never pay your bills, have been placed for collection or claimed bankruptcy.
In front of the number there is a letter. The letter stands for the type of credit you are using. R means you have revolving credit such as a credit card, O means you have open credit such as a line of credit and I means you credit has been given on an instalment basis.
Your credit score is a numerical representation of the your current and past credit. It can range between 300 representing the lowest and 900 representing the best rating.
The breakdown that is used to determine your credit score is the following:
35 per cent Payment history
30 per cent Amounts owed
15 per cent Length of credit history
10 per cent New credit
10 per cent Types of credit
TOP TIPS ON KEEPING A GOOD CREDIT SCORE
1.) Make your payments in the correct amount on or before the due date! This will have a positive effect on your credit score. Missing or late payments and judgements, bankruptcies, collections or other public records will have an unfavourable impact on a credit score.
2.) Keep your balance considerably lower than the available credit limit provided. If you have several accounts with high balances relative to your available credit, this may indicate that you are relying greatly on credit to meet your daily needs.
3.) Multiple credit inquiries can lower your credit score, so reduce the number of credit applications you make.
4.) Always maintain a credit history. You can use a credit card to build a good history.
5.) The best mix of credit is a combination of a store credit card and a major credit card such as a VISA or MasterCard. It is important not to have too many credit cards or store cards as that may negatively impact a credit score.
OSFI tightens mortgage rules Edit
The Office of the Superintendent of Financial Institutions Canada (OSFI) published the final version of Guideline B-20 Residential Mortgage Underwriting Practices and Procedures. The revised Guideline, which comes into effect on January 1, 2018, applies to all federally regulated financial institutions.
The changes to Guideline B-20 reinforce OSFIs expectation that federally regulated mortgage lenders remain vigilant in their mortgage underwriting practices. The final Guideline focuses on the minimum qualifying rate for uninsured mortgages, expectations around loan-to-value (LTV) frameworks and limits, and restrictions to transactions designed to circumvent those LTV limits.
OSFI is setting a new minimum qualifying rate, or stress test, for uninsured mortgages.
Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
OSFI is requiring lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk.
Under the final Guideline, federally regulated financial institutions must establish and adhere to appropriate LTV ratio limits that are reflective of risk and are updated as housing markets and the economic environment evolve.
OSFI is placing restrictions on certain lending arrangements that are designed, or appear designed to circumvent LTV limits.
A federally regulated financial institution is prohibited from arranging with another lender a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institutions maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.
To find out how this will affect you, please contact me at anytime.
Easy ways to keep more money in your pocket
It goes without saying that most of us would appreciate a little more money in our pockets. Believe it or not, its actually an achievable goal. In fact, a few simple tips can help you uncover meaningful savings each and every month. Need some ideas? Heres a little inspiration to get you started:
1. Pack food from home for lunches and snacks. Skip sandwich bags and opt for reusable containers, cutlery and drink bottle.
2. Switch light bulbs to CFLs. On average, it costs $250 a year in energy costs to light your home with incandescents. Save $150 by going with CFLs. Theyre more expensive initially, but will last 10 times longer.
3. Review and negotiate your service plansphone, internet, cable and television content.
4. Invest in topping up your insulation. Attic insulation can settle and compact over time, diminishing its original R-value and increasing heating/cooling costs. Topping it up with a quality batt insulation, like Roxul Comfortbatt, will immediately help improve the comfort of your home and reduce your monthly energy bills.
5. Pay off credit card debt and swap cards for lower interest rate options.
6. Install low-flow water fixtures to cut down on excess water consumption.
7. Lower your thermostat by two degrees in cold weather and increase it by two degrees in warmer weather.
8. Launder your clothes in cold water and at off-peak times.
9. Avoid impulse shopping. Stick to your list and avoid window shopping, which tends to draw buyers in.
10. Save money on entertainment by looking for free activities. For options in your area, try a simple internet search. You might be pleasantly surprised at the wide variety of activities and entertainment available for no or low cost.
Collectively employing the tips above could potentially add up to thousands in annual savings, proving that sometimes change can be a good thing.