Your Credit Score... RULES
Credit Bureaus - Part 1. Credit bureaus (or “credit reports” as they are sometimes called) are a critical part of a residential or commercial mortgage application.
Credit Bureaus – PART 1
Credit bureaus (or “credit reports” as they are sometimes called) are a critical part of a residential or commercial mortgage application. Within the credit bureau is a “beacon score.” This is the score that lenders look at in determining your eligibility for a specific product and interest rate.
DO YOU KNOW YOUR SCORE?
If you don’t know your score, you need to go to www.equifax.com and choose the $23.95 report option. Even if you’re not considering refinancing or purchasing a home or rental property any time soon, you owe it to yourself to complete this critical step.
There is a common myth I’d like to dispel for you today—that checking your credit report lowers your credit score. This is not true. The reality is that checking your credit report on a regular basis is one of the best ways to monitor your credit and has no effect on your beacon score.
Once you have obtained your credit bureau, check your report thoroughly for mistakes or items that should have been removed and/or updated. An example of this is a collection for an unpaid outstanding debt. Don’t be afraid to look into any items that don’t make sense.
Your Beacon (Fico) Score
This score is the most important number associated with your name and it is calculated based on the information within your credit report. Lenders look at your score to determine if you are a good candidate for credit. Ideally, you want a score of 680+ but a score of 630 should still get you a decent interest rate. Scores in the 500s usually result in higher lender fees, a higher interest rate or worst case—the lender refusing to offer you a mortgage.
The following example shows how your beacon score can effect your monthly mortgage payment.
Beacon Score Loan Amount Interest Rate Monthly Payment
700 $400,000.00 5.89% $2,533.13
598 $400,000.00 8.25% $3,116.92
In this example, the difference in the beacon score has resulted in a $583.79 payment difference per month for the same loan amount.
Credit Inquiries
The more inquiries you have on your credit bureau the more your credit score will be negatively affected. If you see a credit inquiry that you believe you did not authorize, call the number of the company associated with the entry in question.
A good example of why you need to keep control of your credit inquiries is when you want to purchase or refinance your home. You rightly want the best rate, so you plan to visit a few banks to compare products and financing options.
For each bank you visit you will have a credit bureau inquiry, which can negatively affect your beacon score. This is why you would consider using an independent Mortgage Broker. They will pull your credit bureau only once, so even if they talk to five individual lenders, they will reference just one credit bureau inquiry, therefore protecting your beacon score.
When it comes to credit inquiries, your objective is to limit the number of inquiries on your bureau.
Credit Information
It is not uncommon for individuals to find errors on their credit bureau and unfortunately they can take up to one to three months to correct. If you are trying to arrange financing within a week for the purchase of that home or rental property you always wanted, you will have next to no time to correct a mistake on your bureau. In this situation, you risk losing the property, your down payment or alternatively—will have to accept a mortgage with an inflated interest rate!
Credit bureaus Part 2 will focus on how to optimize your credit score within your credit bureau. Again, even if you are not considering refinancing or purchasing a property anytime soon… this will apply to you and is a must-read!
Matthew P. Buxton
Matthew is the owner and broker of Alberta Mortgage Solutions Inc. and a member of the Real Estate Council of Alberta. He can be reached at (403) 836-2674. For more financing advice, or to find out your chances of getting a mortgage, visit his website at www.abmsi.ca
Reproduction / use of this article is only permitted if used in its entirety AND must include the authors name, the company name - Alberta Mortgage Solutions Inc. and link to our website - http://www.abmsi.ca
Credit bureaus (or “credit reports” as they are sometimes called) are a critical part of a residential or commercial mortgage application. Within the credit bureau is a “beacon score.” This is the score that lenders look at in determining your eligibility for a specific product and interest rate.
DO YOU KNOW YOUR SCORE?
If you don’t know your score, you need to go to www.equifax.com and choose the $23.95 report option. Even if you’re not considering refinancing or purchasing a home or rental property any time soon, you owe it to yourself to complete this critical step.
There is a common myth I’d like to dispel for you today—that checking your credit report lowers your credit score. This is not true. The reality is that checking your credit report on a regular basis is one of the best ways to monitor your credit and has no effect on your beacon score.
Once you have obtained your credit bureau, check your report thoroughly for mistakes or items that should have been removed and/or updated. An example of this is a collection for an unpaid outstanding debt. Don’t be afraid to look into any items that don’t make sense.
“It’s not uncommon for individuals to find credit bureau issues”
Your Beacon (Fico) Score
This score is the most important number associated with your name and it is calculated based on the information within your credit report. Lenders look at your score to determine if you are a good candidate for credit. Ideally, you want a score of 680+ but a score of 630 should still get you a decent interest rate. Scores in the 500s usually result in higher lender fees, a higher interest rate or worst case—the lender refusing to offer you a mortgage.
The following example shows how your beacon score can effect your monthly mortgage payment.
Beacon Score Loan Amount Interest Rate Monthly Payment
700 $400,000.00 5.89% $2,533.13
598 $400,000.00 8.25% $3,116.92
In this example, the difference in the beacon score has resulted in a $583.79 payment difference per month for the same loan amount.
Credit Inquiries
The more inquiries you have on your credit bureau the more your credit score will be negatively affected. If you see a credit inquiry that you believe you did not authorize, call the number of the company associated with the entry in question.
A good example of why you need to keep control of your credit inquiries is when you want to purchase or refinance your home. You rightly want the best rate, so you plan to visit a few banks to compare products and financing options.
For each bank you visit you will have a credit bureau inquiry, which can negatively affect your beacon score. This is why you would consider using an independent Mortgage Broker. They will pull your credit bureau only once, so even if they talk to five individual lenders, they will reference just one credit bureau inquiry, therefore protecting your beacon score.
When it comes to credit inquiries, your objective is to limit the number of inquiries on your bureau.
Credit Information
It is not uncommon for individuals to find errors on their credit bureau and unfortunately they can take up to one to three months to correct. If you are trying to arrange financing within a week for the purchase of that home or rental property you always wanted, you will have next to no time to correct a mistake on your bureau. In this situation, you risk losing the property, your down payment or alternatively—will have to accept a mortgage with an inflated interest rate!
Credit bureaus Part 2 will focus on how to optimize your credit score within your credit bureau. Again, even if you are not considering refinancing or purchasing a property anytime soon… this will apply to you and is a must-read!
Matthew P. Buxton
Matthew is the owner and broker of Alberta Mortgage Solutions Inc. and a member of the Real Estate Council of Alberta. He can be reached at (403) 836-2674. For more financing advice, or to find out your chances of getting a mortgage, visit his website at www.abmsi.ca
Reproduction / use of this article is only permitted if used in its entirety AND must include the authors name, the company name - Alberta Mortgage Solutions Inc. and link to our website - http://www.abmsi.ca
