What many prospective borrowers don’t realize is that the pricing of mortgages and other loans is based in part on their credit-worthiness. Consumers need to be aware of how their credit is evaluated by lenders, and how they can work to avoid so-called “bruised credit” – people with a lower credit score can find themselves paying a higher interest rate, or even denied access to certain types of loans.
A credit report is a detailed history of how consistently you meet your financial obligations, and provides a picture of your financial health based on your past behaviour. A credit score is a three-digit number, usually between 300 and 900, representing your overall credit-worthiness, based on personal information from your credit report and other sources.
Both your credit report and score are important. When deciding whether or not to grant a mortgage loan, lenders refer to an applicant’s credit report and score, along with a range of other factors such as income, employment history, and size of down payment.
The higher your score the more likely you are to be approved for a mortgage and receive favourable rates because the lender considers you to be a better credit risk. Several factors are used by the two credit agencies in Canada (Equifax Canada and TransUnion Canada) to calculate credit scores:
* Debt payment history.
* Amounts owed compared to your current credit limits with lenders.
* How often you seek new credit.
* Length of time you have had credit accounts.
* Type of credit, such as car loans, lines of credit, credit cards.
About Invis
Invis is Canada’s largest mortgage brokerage firm with a national team of over 750 mortgage consultants. Invis Mortgage Consultants provide unbiased financial analysis, mortgage sourcing and mortgage advice for both first time homebuyers and repeat buyers. Invis arranged more than $6 billion in mortgages in 2006.
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Contact the Jeffrey Team for more information – 416-388-1960