Two words:  credit correction.   Shivers!  Way to clear a room!  The topic might make some people a bit squirmy, but this is important stuff – hence the blog! Why, you ask? Well, some folks feel that it can be a lengthy, arduous process and that the pay-off isn’t worth the effort that it takes to sort things out. Or worse, they believe that the situation will correct itself in time; that it’s nothing to worry about. Some folks are simply afraid to address what they suspect could be a negative report, so, they wait…they sit on it…time goes by and all the while you could have a great report! Or your fear could be a reality; there could be some very important issues that need your prompt attention. If you believe that leaving it alone is best and that everything will just go away and all will be right in the world again soon, sadly, I must tell you, that this is not necessarily the case. Sometimes life presents us with seemingly insurmountable obstacles – financial and otherwise. We get it! Heck, we’ve probably been there! But, take it from the professionals here at Your Money Matters; there could be items that are negatively impacting your report and in order to qualify for the best mortgage interest rate and product (or any mortgage product for that matter), it might be necessary to clean up an outdated, incorrect or otherwise ‘bruised’ report as quickly as possible.  And guess who will be right there to walk you through the steps. That’s right. Us.

The credit report goes very deepDid you know that these 12 things (at least) are reporting on your credit report?

  • Legal name
  • Social Insurance Number
  • Birth Date
  • Past and present residential address
  • Employment History
  • Whether or not you have credit.
  • What types of trade lines (credit cards, car loans, student loans, etc.) you have or had.
  • Current or past Mortgages. Yes, they are now being reported.
  • Credit depth (how long you have had credit for).
  • Repayment history (whether or not payments have been made on time), also reporting late payments and how late payments were made including default (non-payment), collection agencies reporting, settlements, consumer proposal and bankruptcy.
  • Utilization (responsible use, reporting on whether or not credit limits have been exceeded).
  • Credit score(s). Yes, there is more than one score on your credit report! There are actually FOUR scores.  There is an overall score + three other scores that help to complete your credit profile.  Your credit scores and the narrative within your report are key factors in whether or not you will qualify for mortgage financing and will help your mortgage broker determine which course of action to take and/or what type of mortgage product will suit you best.

If any of the information on your credit report is incorrect, it can be updated fairly easily. Give us a call and we can walk you through the steps.

Rebuilding credit can be a fairly simple and quick process. This, of course, depends on the number of derogatory or inaccurate items listed on the credit report and/or if there are large sums of money owing on any accounts (which, depending on income and budget, can take longer to pay down or pay off).   A credit report has an overall credit score, but every account on your credit report is also assigned an individual repayment history rating. For instance, if a credit card balance is close to the credit limit (or worse, over the limit) and/or it has been paid late a few times and/or if the minimum payment is not made regularly, it will have a lower rating than an account with perfect repayment history (i.e. always on time and at least the minimum payment made). The lower the rating, the harder it may be to correct, quickly. And indeed, there are certain derogatory items that will not ‘fall off’ a credit report for several years even if you do pay it off or settle for a lesser amount.   But whether there is one or even several items to correct or update, we are here to help make the process smooth and swift. Give us a call to discuss further.

Applying For A Mortgage? Here are 5 Factors Lenders Use to Determine Risk.

The first step in applying for mortgage financing is to complete a mortgage financing application. The application provides us with the information needed to underwrite. In the mortgage industry, underwriting is the process of assessing the risk of providing a mortgage to a prospective borrower on a certain piece of property.  Mortgage companies determine their own particular guidelines and formulas for determining the risk of the mortgage applicant in addition to lender specific and standard regulations. There are various factors used to determine risk. Here are 5:

  • Credit worthiness of the client; generally determined by a credit score and credit behaviour reflected on the credit report.
  • Applicant’s net worth.
  • Applicant’s income, past and present, and assets.
  • Applicant’s monthly budget, including current liabilities.
  • Job tenure

The mortgage application also provides us with a snapshot of your current dwelling status, employment status, the purpose of the loan (home purchase or refinance), and property details. By agreeing to the terms and conditions (at the bottom of the application) and submitting your application you are authorizing us to obtain your credit report. We will review your application along with your credit report and then we will contact you to discuss your options.

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Seems simple enough, right? But, what if there are blips, bruises, dings or discrepancies on your report that are clearly having a negative impact on your credit score and the narrative within your report? Does that mean no mortgage financing for you? No, not necessarily!

As I mentioned earlier, sometimes a credit report will need to be updated prior to applying for mortgage financing in order for you to qualify for financing and/or to get the best interest rate and product. Perhaps there is a discrepancy with your first, middle or last name. Something as seemingly simple as the spelling or the order of your name(s) can raise a flag. In this day of cyber fraud and identity theft, we cannot be too careful.  Or, perhaps there are old accounts that are paid off and closed that should be removed. Or perhaps you thought something was paid off and it wasn’t and it’s still reporting and negatively impacting your credit score and report. There may be other types of discrepancies that need to be addressed and corrected. There may even be an account, or accounts, that are not actually yours. Perhaps there was a default in the past and an account was sent to a collection agency and it’s on your report. How does one reconcile that, how is that viewed by lenders, and how does it impact your credit report and score? Obviously our credit reports are very important if we are to be applying for credit of any sort. It is our responsibility to check in every so often just to make sure that there are no surprises when applying for credit/mortgage financing and to make sure that the information on our reports is accurate.

Obtaining a mortgage is also about timing. It can take weeks, months or even years to position a client for mortgage financing. Sometimes we do find errors or items that need to be paid or updated or removed … and so where does one start and how long will it take to position YOU for mortgage financing? We can help you with that! Please contact us and we will outline the simple steps to get the ball rolling, to update your credit report, and to position you for the best interest rate and product available.

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All the best,

Roy

Roy Perreault, our Operations Manager, also maintains our website and manages content; he heads our social media marketing, advertising and branding initiatives; he has fun with metrics and analytics and coffee. LOVES coffee.  In his personal time, he enjoys home renovation projects (check the blog!), photography, recording music, concerts, and traveling.  Sometimes he sleeps.