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Credit is the driving force of our economy.
It finances our homes, our vehicles and our vacations. It also helps us to pay for things like appliances or hotel rooms. In short, for
many people credit is "the good life".
Credit allows you to carry less cash or rent a car without a lot of hassles. Credit is the only way you can purchase items online or to buy airline
tickets.
Credit is neither good nor evil... it just depends on how you use it. The misuse of credit can ruin your financial health or destroy your self-esteem, marriage, and your entire life while
proper use of your credit can make all your dreams come true!
Basically, credit is a promise to pay for something in the future that you received in the
present... for example - a mortgage is a
type of credit. A Mortgage allows you to make a very large purchase that you otherwise would not be able to pay upfront.
If your dream is to buy a home and you
don't have the cash, you'll need
to rely on credit to help you to achieve your goal. Today, if you have good credit you could, for example, purchase $200,000 dollar home with as little as 5% down payment and have smaller monthly
payments than someone who has poor credit and who buys the same $200,000 home with a 25% down payment.
Having good credit is a necessity in today's world, yet millions of Canadians are turned
down for loans, mortgages and credit cards every year. .
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Know where you stand now!
There are number of ways for you to build credit, but before you get started you'll need to obtain a copy of your credit report. How can you re-establish your credit if you don't
know where you stand in first
place?
Once you have your credit report check it for unpaid collections. One of the best ways to get your credit rating headed in the right direction is to begin with paying off your bad
debts.
You can obtain a free copy of your credit report simply by contacting Equifax National Customer Care Centre at 1-800-465-7166, Trans Union at 1-866-525-0265 or click here to purchase it online for $15.50 from Equifax and read it instantly.
Credit scoring has an enormous impact on your financial picture. It
can mean the difference between getting a good interest rate on your mortgage loan, or whether you even qualify at all. It is therefore imperative to be well-versed on the factors that influence your credit score,
and have the ability to take simple, yet very important steps to clean up your credit. The purpose of this newsletter is to put you on the right path to obtaining a better loan at some point in the future.
We all know that good credit translates into lower rates for consumers and you need to know how to work the system to your advantage, and have a plan in place to get a better deal
when things don't immediately
fall into place for you.
Understanding your credit bureau is the first step to establishing good credit.
The Five Factors of Credit Scoring
What the credit scoring model seeks to quantify is how likely you are to pay off your debt without being more than 90 days late on a payment at any time in the future.
Credit scores can range between 300 and 850. The higher your score is, the less likely you are to default on your loan. Only one out of approximately 1,300 people has a credit score of 800. These are clients who walk
away with the best interest rates. On the other hand, one of eight prospective home buyers are faced with the scenario that they may not qualify for the loan they want because they have a lower score, between 500
and 600.
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Here is a simple chart to give you the tiering structure and what it means to the lender.
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720-850
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You are at the top of the best rates and terms offered to you.
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700-719
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Excellent score. You are very desirable borrower.
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680-699
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Good Credit. You should be in good shape to buy.
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660-679
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Ok credit. Don't look for other exceptions.
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640-659
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Borderline. Ok if everything else is strong.
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620-639
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Weak. The rest of your life must be perfect.
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600-619
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Difficult. Needs some work, or a special program.
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Below 600
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Trouble! Try to fix up your credit immediately!
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Your credit score comprises five factors and I listed these below in order of importance, just as lender will see it.
Payment History: 35% Impact. Paying debt on time and in full has a
positive impact however late payments, judgments and charge-offs have a very negative impact. Missing a high payment has a more severe impact that missing a low payment.
Outstanding Credit Balances: 30% Impact.
The ratio marking the difference between your outstanding balance and your available credit is important here. Ideally, you should keep your balance below 10 percent of your available credit limit.
Credit History:15% Impact. This marks the length of time since a particular credit line was established. A seasoned borrower is stronger in this area.
Type of Credit: 10% Impact. A
mix of auto loans, credit cards, and mortgages is more positive than a concentration of debt from credit cards only.
Inquiries:10% Impact. This quantifies the number of inquiries that have been
made on your credit history within a six month period. Each hard inquiry can cost from two to 50 points on a credit score but the maximum number of inquiries that will reduce the score is 10. Eleven or more
inquiries in a six-month period will have no further impact on your credit score.
One thing that is important to remember is that computer is not taking any personal factors into consideration when it calculates your score. When lenders run your credit report, it
is simply today's snapshot of your credit profile.
This can fluctuate dramatically within the course of a week, depending on your own activities. Be aware of this when you go out on a shopping spree. You need to make sure you are not creating a negative impact
on your score while the lender is reviewing it
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Copyright VERICO One-Link Mortgage & Financial - Owned & Operated by 4549440 Manitoba Ltd All rights reserved.
VERICO One Link Mortgage & Financial is a member of the Better Business Bureau,
the Winnipeg Real Estate Board and the Canadian Association of Accredited Mortgage Professionals (CAAMP)
Each VERICO Broker is an independent owner operator. TM & R trademarks of Verico Financial Group.
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