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.
Home affordability improved in Q2 2020
Housing affordability in Canadas large urban centres improved in the second quarter of 2020 after having deteriorated in the two prior quarters. Higher incomes helped in Q2 but the largest portion of the improvement came in the form of lower interest rates. Indeed, the latter declined 19 basis points in the quarter, reflecting the easing from the central bank. Combined, income and mortgage rates were more than enough to offset the increase in home prices. Still, the decline in interest rates on a quarterly average basis does not completely reflect the change in 5-year mortgage rates since the beginning of the COVID-19 pandemic. The February to June decline in mortgage interest rates was a much more significant 41 basis points. Looking ahead, the preliminary data for rates shows additional improvements in the third quarter of the year (cumulatively they are down over 70 bps). While we expect this to help affordability, home prices should remain resilient based on the latest resale market data showing record sales volumes. Homebuyers have rushed back to the market after having delayed purchases and are now being offered record-low interest rates. Once pent-up demand is exhausted, the Canadian housing market will still have to face high levels of unemployment and reduced household formation due to lower immigration.
Bank of Canada maintains commitment to current level of policy rate, continues program of quantitative easing
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of percent. The Bank Rate is correspondingly percent and the deposit rate is percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds.
Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.
The rebound in the United States has been stronger than expected, while economic performance among emerging markets has been more mixed. Global financial conditions have remained accommodative. Although prices for some commodities have firmed, oil prices remain weak.
In Canada, real GDP fell by 11.5 percent (39 percent annualized) in the second quarter, resulting in a decline of just over 13 percent in the first half of the year, largely in line with the Banks July MPR central scenario. All components of aggregate demand weakened, as expected.