Your Credit Score can Save or Cost You $1,000’s

In Canada, two main credit bureaus—Equifax and Trans Union—collect information about our credit and financial history and watch whether we are paying our bills on time.

Through an electronic system, we are assigned a credit score—from as low as 300 to as high as 900—with most Canadians scoring between 650 and 700. The higher the score, the better.

For a mortgage to buy a home, a 650 to 700 credit score is considered good.  For the 0% down payment option, lenders look at a minimum Credit Score of 680.

In the mortgage world, lenders regard a person with a score lower than 610 as a “B” client. Banks won’t like certain aspects of the borrower’s credit history, and about 1 out of 5 Canadians fall into this category. 

The Good News Is…
…There are dozens of lenders, called B Lenders, who will give a mortgage to below 610 credit score applicants. Our in-house mortgage specialists have seen mortgages put together with scores as low as 550; interest rates, however, can be higher.

5 Factors that can negatively affect Your Credit Score:
 1.     Paying bills late,
2.    Outstanding balances above 75% of one’s credit limit can harm credit. Trans Union suggests balances under 30%.
3.    The number of inquiries for new credit or shopping for a mortgage; applying for lots of credit cards and loans,
4.    A creditor reporting a late payment in error,
5.    Having someone else’s bad info on your file by mistake.

Credit scores fall into ranges
A best range of 720 + attracts best interest rates.
A low range of 500-559 can attract rates as high as +3.5% above best rates.

A good mortgage broker can shop mortgage lenders and, given the competitive environment, can often find lower rates than suggested above. 
Other Considerations
In mortgage lending, and aside from Credit Scores, the lender will also take into account the property being purchased and the homeowner’s equity.

Sources: Centum Omni Mortgage Corp, Equifax & Trans Union.

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