When working with buyers the question will come up have you spoken with your bank about whether or not you are qualified for the price level you are shopping in? This can be a conversation that happens at one of our first meetings and really it should. The challenge can be the buyer may be reluctant to part with this information until they get to know us, or simply they just don't know.
The first step in your buying process should involve a consultation with a mortgage specialist. I recently had an opportunity to speak with Scott Bourke a Mortgage Specialist with a local Mortgage Broker here in Red Deer, Regional Mortgage. The interview is below. I was specifically interested in credit for this interview.
Scott, I'd like to ask you about credit scores. Often we here terminology or phrases such as "good credit" or "bad credit". Can you give me examples of what a good score is and a bad score and what makes that up?
First, Your credit is based on a point system that is calculated based on your repayment history, and usage on your current credit (loans, Credit Cards, and Line of Credits). A "good credit score" is usually around the 600 point mark, and above. Usually, if you are under that 600 mark you have some blemishes on your credit, for example, Maybe you have some late payments on some loans or credit cards. It could mean you have a collection outstanding on your credit, or your credit balances are close to or over your credit limit.
Over time I can improve my score by?
The best way to improve your credit score is to make your payments on time, and try and keep your amounts owing on revolving credit (credit cards) at about 60% of the limit. For example if you have a credit card with a $1000 credit limit try and keep the balance around the $600 mark if you need to carry a balance. The closer you are to your credit limits will result in lowering your credit score. Also try and stay away from applying for too much credit, too many enquiries could also lower your score.
What are the benefits to having a good, better or best credit rating for me when I apply for a mortgage?
Your difference in score will really help you when you are applying for a mortgage because the better your score, the more banks that will want to have you as a customer. If you are under the 600 mark, that takes away a lot of the banks that are looking to lend you money. It also makes it a little more difficult to get insurance on the mortgage (required if you have less than a 20% down payment). If you are at the 680 mark, every bank wants you and that will give you a lot more options. Also if you are under the 600 mark, you could be looking at higher interest rates or insurance premiums.
What happens if I want to buy a house with my spouse and I have "bad" credit and she falls under the "good" credit category?
This is a really tough question to answer. The lenders will usually look at the higher income earner and most of the weight will fall on that person. If the higher income earner is the one with the good credit, they should be able to still qualify for a mortgage with discounted rates and fall within the insurers guidelines. If the higher income earner is the one with the poor credit, we could be looking at higher interest rates, or have to work on getting the credit fixed before proceeding with a mortgage.
What is the benefit for me in monitoring my credit score an how do I do that?
The benefit to monitoring your own credit score would be, to understand what is going on with your credit and payments. It is also good for you to check your credit once or twice a year just to make sure that there has not been any credit fraud against you. Check for credit cards that you did not apply for or loans that are not yours. You can check those by visiting Equifax's web site at www.equifax.ca. Enquiries that you pull yourself do not effect your credit score.
What is the most common credit score or rating that you come across and can you describe what type of person that would be?
The credit score that most people have is in the 650 to 750 mark. These are people that have made their payments on time have a couple credit cards maybe one of the cards is getting close to the limit, or a new loan that they just received. If you can get, or keep your score at a 680 mark, that is where you would like to try and keep it.
Regional Mortgage Corporation
866-343-1125 Toll Free
If you would like to see more Q&A on real estate I'd be happy to look into them for you. I trust this helps answer some of the questions you may have regarding credit and what it means to you. Thank You Scott for your help.
Your Friend in Real Estate,