Credit Bureau Reports
Whether you are getting your first mortgage, refinancing an existing mortgage, or getting a new mortgage on a new property, your credit score is a very important factor in your application!
That’s why it is important to know what your credit score is, and how you get, and keep, a good credit score!
What is a lender looking for?
- Lender’s want to see that you know how to use credit wisely, so they want to see that you have multiple lines of credit, you’ve been making payments on time, and that you are not maxing out your lines of credit.
- The general rule of thumb is 2x2x2. Lenders are looking for at least two open lines of credit (preferably a mix of revolving credit and instalment credit types), at least two years old, and have a limit of minimum $2,000.
- That all of the current and past lines of credit have “1” status (M1, I1, O1, R1).
- All lines start at a rating of “1”, every consecutively missed payment increases the rating (i.e. if you missed 3 consecutive monthly payments you would have a “4” rating).
- The lender’s with the best rates, and product options, are looking for a beacon score of at least 680.
- Collections & Securities
- They want to confirm if any securities against you are discharged, or the payment related to the securities is accounted for.
- Any old, or current collection items must be taken care of prior to obtaining a mortgage.
How do you get a good credit score?
There are multiple components that make up a good credit score!
- Keep your borrowing capacity under 80% of your credit lines limit.
- Always pay at least your minimum owing on time, if you can pay the full amount owing, it is advised.
- Opening/Closing lines
- Constantly opening new lines, and closing old lines, will impact your score. It may not have a long lasting effect, but at least temporarily, these changes do lower your score.
- Having a mix of credit types does help your credit score. A combination of lines that are revolving (credit cards, store cards) and instalment (loans, mortgage, etc) types of credit, helps increase your credit score.
I always advise clients that they should start by ordering their own credit bureau through Equifax or Trans-Union, to confirm some basic information. Yes it is true that the bureau I review is different than what an individual will be able to access, however, it is worthwhile to order your own report.
For all your home financing needs, please feel free to contact me any time via phone, email or text message.