|
Dear friend,
Did you know that the interest rate you are paying today
may be affected by your credit rating? Do you know how
to improve your credit bureau score so that you can
obtain the best interest rate?
I have gathered some information about the credit bureau
that I feel is important for you to know as a consumer.
Credit is one aspect in life that makes the world go around.
Without it, your purchasing power is weakened. Your credit
bureau tells a story. It tells a story of how you manage
your credit; your past, right up until the present. Your
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 score - EVER!
Firstly, we'll discuss what your credit bureau discloses
to those who pull it. In it, you will find the following:
your name, your social insurance number, your address, your
employer, your past credit inquiries to whom and when, your
credit lines active and inactive, past derogatory payments,
past bankruptcies (if under 7 years from discharge), collections
outstanding and satisfied, whether a credit line is "revolving"
(i.e. credit cards) or "installments" (i.e. loans, lines
of credit), individual accounts, joint accounts, account
balances, and account limits.
Within the accumulation of credit usage, the bureau agency
will place a "credit score" on your account. This is referred
to as a "beacon score" through Equifax. You may have heard
other score names such as "FICO" score - depending on which
bureau agency is pulling it. Ninety Five percent of the
credit bureau's pulled in Canada are either through Equifax
or TransUnion. Your credit grantor (i.e. Visa or Mastercard)
reports to these agencies for most of the credit transactions
you perform. In the past, credit unions have not reported
to the any bureau; however, this is changing as time goes
on.
Your
score tells the story of how well you have used your credit
privileges in the past, and predicts what your credit will
be like in the future. The score is rated from 300
- 900. The higher the score usually indicates that
you have used credit wisely in the past. Although
the score is a "first glance" look at the overall picture,
it is not the "be all and end all" to your story.
If for example you have never been late on a payment, but
have many trade lines open with high balances owing, your
score would drop as it indicates to a lender that you rely
on a lot of credit. Of course, each situation is different
- perhaps you use a lot of credit for business purposes.
If that is the case, then disclosure of the accounts to
the lender would suffice for an explanation. Everyone
has their own unique way of using credit, and it is our
job to study the bureau before we start to deal with any
lender.
GOOD
CREDIT, BAD CREDIT
The long and short between good credit and bad credit is
this; the better your credit, the better opportunity you
have of receiving a better interest rate! Seems simple.
What about the bad stuff? Not everyone can have perfect
credit ALL the time. The lending industry is becoming
more and more savvy in being able to provide
alternatives for "less desirable" credit situations.
Let's face it; they want some kind of security in
knowing they are going to get their money paid back in
full, and on time, when they lend their money. The
catch? You guessed it, higher interest rates. With many
lenders to choose from these days, we have high-risk
lenders that specialize in providing programs that help
out the bruised credit client. What exactly are "higher
rates" in today's market? The good news...higher
interest rates in today's
market means you're usually paying on an interest rate that
would likely place you in a historic average. That's
no so bad.
HOW
TO CHANGE YOUR BRUISED CREDIT FOR A MORE ATTRACTIVE 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 reasons
for getting into a little credit trouble. Again, hope
is not lost - it's time to start building your credibility
back up! There are certain ways to go about it - some
ways are faster than others and I'll share them with you.
If
you have any "bad debts" that are left outstanding (i.e.
collections that are not paid out, 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 that you trying to build
your credibility back up. And where better to start than
to fix your past mistakes? So now you're 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! You need to start building credit lines
back up, but you also need to be careful which credit
lines 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.
Some of the "less desirable" credit
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 usually don't report to the
bureau, UNLESS you are delinquent on any payment.
Department store cards allow you to carry a balance BELOW
what any mortgage lender is interested in seeing.
The
best way to build your credit back up is with secured credit
cards. How does it work? You start by setting
your own credit limit because your 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 you're set to go. You also earn interest in this
account for as long as it's open.
One of the best
ways to get a hold of a secured card is through Home Trust
Company where they can supply a VISA card. Attached
below is a link that will take you to the Home Trust Secured
Visa page that will fill you in on the details.
http://www.hometrust.ca/securedvisa/
Re-establishing your credit cannot be done overnight.
There are definitely strategies out there that will benefit
you faster than other ways. If you have any questions
about your credit, give us a call and we'll talk it over!
Sincerely,
DAN MASS,
Mortgage Agent
Mortgage One Capital Corporation
700-4th Avenue SW
Calgary, Alberta, Canada
direct:
403.294.0033
cell: 403.710.1505 fax: 1-866-902-4910
toll free: 1-866-618-6177
email: dan@canadafirstmortgage.com
|
