Credit Bureau
Important information you NEED to know about your credit
bureau…
Your credit bureau tells a story. It tells a story of
how you manage your credit. From your past, right up until
the present – your credit bureau has a long memory and
will tell all to everyone you give permission to look at it. From
this point forward, no matter how good or bad your credit has
been, and if you follow the instructions below – you will
never have to worry about receiving a bad credit review - EVER! Here
are the ins and out’s of your credit bureau…
Your credit bureau has a score on it. This score tells
a story of how well you have used your credit privileges in the
past, and predicts what your credit will be like in the future. Everything
from where you have requested credit, to your credit limits and
how much credit you currently hold on each credit line. It
will tell if you have been bankrupt (unless it’s been over
7 years since you’ve been discharged), and if you have
anything that has gone to a collection agency. It will
indicate how many individual credit lines you have, as well as
how many “joint” accounts you share. It will
provide your address, your last place of employment, and your
birth date.
BUREAU TIP – When your credit balances
are within 80% of the maximum credit limit, your score goes down
as the mortgage lenders view this as a “higher risk” position
to be in. When shopping for a mortgage, try to have your
balances down as much as possible before your credit
bureau is pulled from Equifax. A lender will view a credit
bureau as a “window to the future”, as well as what
your present credit is. If a consumer has too many credit
trade lines that are “maxed” out, the lender sees
the financial position of the consumer will likely not change
within the 12 months. The credit bureau is a pivotal piece
in determining credit “worthiness” in the eyes of
the lender.
The issue of having your credit pulled multiple times, and having
your score affected is one of the most common concerns when it
comes to dealing with your credit bureau. The reason is
because every time you have your bureau pulled by a credit grantor,
a couple of points come off of your score. Consumers are
encouraged to shop around, but every time they seek credit, it’s
another hit! That’s not necessarily the case these
days. Most credit scoring models, including Equifax, are
treated in a special manner. Multiple inquiries for the
same “type” of inquiry (i.e. auto or mortgage) regardless
of the number of inquiries within a 14day period, only count
as a single inquiry.
WHAT ABOUT BUREAU DISCREPANCIES?
Equifax is not immune to human error. Although the bureau
itself is kept on an electronic database, errors can happen on
the “submitting” end of things. The good news;
if there is a discrepancy on your credit bureau, you can have
it fixed! A phone call, or an email to Equifax with an
explanation and supporting documentation can get your bureau
information updated and correct. One thing is for sure – when
you’re late on a payment, it WILL show up. On the
other hand, sometimes the creditor is not always most efficient
when it comes to reporting to the bureau and letting them know
that a payment has been made, or no longer exists.
GOOD CREDIT, BAD CREDIT
You may have discovered by now that having good credit equals
more opportunity to receive a better review from a lender – in
turn giving you a better chance to receive a better interest
rate. This is true. But what about the bad credit
and the no credit situations? Not everyone can have perfect
credit, all the time. The lending community knows
this and have arranged for situations like this. Depending
on just how bad your credit is currently, most situations can
be dealt with. If your credit has seen better days, and
you want to make a purchase on a home or refinance your mortgage,
there are “higher risk” lenders that will look at
lending to you. Always remember – the higher the
risk, the higher the interest rate. This is viewed to be
the “penalty” of having poor credit. As brokers,
and placing your mortgage with higher risk lenders, we view it
as a temporary loan. We want to see you out and in a better
mortgage as soon as possible, but only when the time is right. That
time will depend on the terms of the lender, and how much the
client works on bettering their credit position.
WHAT’S THE MATTER WITH NO CREDIT??
Having no credit to report can prove very difficult to secure
a mortgage. Some may say that having bad credit is better
than posing no credit at all. The no credit situations
obviously have a “high risk” lender written all
over it. But, here’s the good news; we deal with
lenders that will take “off bureau” loans or payments
as proof of credibility. A total debt (or debts) totaling
$5000, opened for a minimum of 12 months of “non-bureau” items
can be included providing we can obtain a written and verbal
confirmation. This includes any loans, installments, rent,
mortgage payments, etc.
Pulling your credit bureau is a mandatory in securing a mortgage
for you. If you have any questionable item that you feel
may hold you back from securing the very best rates, we suggest
that you pull your own bureau through Equifax FIRST! You
pay a small fee for pulling your own bureau, but we highly recommend
it. You can obtain your bureau through the following link: http://www.equifax.com/EFX_Canada/. If
you get to see what we will see before it hits our computers,
you will be better prepared in knowing what to expect. Furthermore,
any discrepancy you see can sometimes be fixed before we submit
it to the lenders; this will better equip you for a more comfortable
interest rate in the long run.
HOW TO CHANGE YOUR BRUISED CREDIT RATING,
TO A GREAT CREDIT
RATING
So you’ve gotten into trouble in the past – not
paying off some loans or credit cards. It happens. Here’s
the problem; a credit bureau does not have feelings, it just
has facts. Everyone has their own personal reason for getting
into a little credit trouble. Unfortunately, unless you
can prove otherwise through solid documentation that the bureau
is incorrect, you have to start building your credit back up.
If you have any “bad debts” that are left outstanding
(i.e. – collections that are not paid off, written off
bank accounts, etc.), you need to pay these off – FIRST! By
doing this, you are already starting off in the right direction. When
a mortgage lender sees that you are making an effort to fix your
past discrepancies, they see you trying to build your credibility
back up, and where better to start than to fix your past mistakes?
So now you are all caught up on past mistakes. You also
need to re-establish yourself with new and different credit lines. This
could be tricky depending on how bad your past has been. Not
every credit grantor may be chomping at the bit to give you credit! Well,
I can see their point to a certain extent – but hang on…
Credit is what makes the world go around – without access
to credit, your purchasing power as a consumer is weakened. How
do you get your credit back if no one will allow you a credit
card or a loan? A Start with small
credit allowances, and work your way back up.
You need to start building credit back up, but you also need
to be careful which credit line to choose. Why? Not
every credit card company reports to Equifax, therefore potentially
making the choice irrelevant. You need to have your credit
companies report to the bureau to help you re-establish your
credit, or a mortgage lender will not see a history. Choices
that come to mind are gasoline cards and department store cards. Although
these are viable “credit” cards, the disadvantages
of owning them outweigh the advantages by far. Gasoline
cards do not report to the bureau, UNLESS you are delinquent
on any payment. Department store cards allow you to carry
a credit limit below what a mortgage lender
is interested in seeing. They want to see a higher than
$1000 credit limit with credit cards. Department stores
will usually only carry about $500 credit limits on their cards. So
where do you turn??...
The best way to build your credit back up is with secured credit
cards. How does a secured credit card work? You start
by setting your own credit limit because your credit limit is
equal to your security deposit. Let’s say you want
$1500 as your credit limit. You pay $1500 into the security
deposit and your set to go. You also earn interest in
this account for as long as it’s open. The best way
to get a hold of a secured Visa card is through Home Trust Company. Attached
below is a link that will take you to the Home Trust Secured
Visa page. There, you will find all the information you
will need on re-establishing your credit through a secured credit
card.
http://www.hometrust.ca/securedvisa/
Re-establishing your credit cannot be completed overnight. There
are definitely strategies out there that will benefit
faster than others. By going the “secured credit
card” route you are headed off into the A1 credit rating
within about a year’s time; and THAT is not a bad timeframe
to give yourself.
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