Credit Scores – How do you score?

General William Douglas 30 Dec

Why you need to monitor your credit score!

All the recent mortgage changes translate into needing a strong credit score more than ever.  Most Lenders rely on the “Equifax” score.  Equifax calculates a daily “risk” score out of a maximum score of 900.  Using Creditkarma.ca will access a TransUnion score which is not used by many lenders but is a good way to monitor activity.  Establishing a score of 700 or higher is considered an excellent score and opens the doors to better interest rates and bank approvals.

PAYMENT HISTORY

This factor determines about a third of your score.  Even a one-day late payment can negatively influence your score and show on your bureau for 6 years.  It’s more important to pay the minimum payment on time than to pay a larger amount late.  Setting up all of your accounts on pre-authorized payments for the minimum amount will ensure that you will never have a late payment.

The MOST important advice I can give is to avoid having anything sent to COLLECTIONS.  No lender will provide a mortgage to someone with an unpaid collection.  Each one decreases your score by about 80 points.  If you are having a dispute with your cell phone or internet provider, pay the bill and then argue about it later!!!

AMOUNT OF CREDIT USED

The amount of usage is another large factor in determining your credit score.  The more of the limit you have used, the lower your score will be.  Keeping your balance under 30% of the total available amount will help your score increase.  If you are in a hurry to improve your score, consider calling your credit companies for a limit increase.  The secret to this trick: DO NOT use the increase !!

OTHER FACTORS

Your Beacon score is also calculated by AGE OF YOUR ACCOUNTS, TYPE OF CREDIT you have and  NUMBER OF ENQUIRIES on your bureau in the last 12 months.  Lenders want to see at least 2 different kinds of credit established for at least 2 years for a total limit of at least $2,500.  A combination of credit cards, loans, and lines of credit are desirable.  If you make numerous calls looking for credit from different companies you will lower your score and is a red flag to lenders.  Keep in mind, if you close an account, your score could drop by almost 100 points!!

If you are interested in relocating to Easter Ontario, I’d be happy to look at your mortgage options with you.

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What are Rate Holds?

General William Douglas 16 Dec

You May Have Heard of the Term “Rate Holds”.

Lenders offer rate holds to potential clients purchasing a new property who need a mortgage.  Rate holds are not used for refinancing a mortgage or transferring it from one lender to another.

Lenders will typically hold a rate for 120 days.  However, some lenders will hold the rate for a shorter period of time.  Each lender offers different options and a Mortgage Broker can walk you through the different options that are best for you.

What Does a Rate Hold Mean

A rate hold does not commit you to work with that particular lender.  It does not influence your chances of receiving an approval down the road.  When lenders offer a rate hold, they do not collect your documents or confirm that you will qualify for the amount of mortgage requested.  It simply holds the rate.  If a lender or Mortgage Broker collects and verifies your documents it is called a “Pre-Approval”.

The Way Rate Holds Work

  • Mortgage Broker submits your application to a lender for a fixed interest rate of 3.59% for 5-years with a 120-day rate hold.
  • 30 days later, that interest rate moves to 3.69%. As long as your mortgage closes in the next 90 days (within the 120-day window from when you got your rate hold), you can keep your 3.59% rate.
  • If rates go down, not up, you can also take advantage of the lower interest rate.
  • Once the 120 days expire, you can submit another rate hold.  It will be for the interest rate on the day of the new submission.

Best Choices

In my opinion, there is more value in a complete pre-approval in which a Mortgage Broker will verify all of your documents and also get you a rate hold.

If you are interested in relocating to Easter Ontario, I’d be happy to look at your mortgage options with you.

📲View current mortgage rates

📲Apply for a mortgage