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What exactly is a credit score, and why is it so important for your mortgage?
Your credit is a big piece of the mortgage puzzle — one that we can easily help you solve. Here are some details to check out.
Your credit — and credit score — can impact your mortgage savings and access to products for a better fit for your situation:
When it comes to your credit, there are things you have control over, and some things you don't. But it's not a complete mystery — you can find out what shape your credit is in to know exactly how it will affect your mortgage loan application, and even update your credit file if there's a mistake.
Our friendly, expert brokers know mortgages inside and out. They easily answer your questions (check out our Credit FAQs, too) to help you solve your credit puzzle. Connect with us online, over the phone, or at one of our convenient store locations. It's just that easy to get your best mortgage help.
Your credit score and rating is produced and compiled by Equifax, a credit bureau, to help you estimate your general credit position, and to provide banks and lenders with information to assess whether or not you're a good (low) credit risk. Using FICO scores (mathematical formulas created by Fair Isaac & Company) and/or Beacon (now Pinnacle) scores, Equifax crunches the numbers from your credit report and spits out a score somewhere between 300 and 900. A low score says you’re a bad credit risk; a score of 700 or higher puts you in the financial driver’s seat. Here are the factors considered by Equifax when calculating your credit score and an estimate of how heavily each factor is weighted.
The higher your number or Pinnacle score, the better your credit rating. The purpose of this score is to provide lenders with a prediction as to the credit risk you represent, based on your past behaviour. Here is what your score is based on:
1. Past Performance – 35%
2. Outstanding Debt/Credit Utilization – 30%
3. Credit History – 15%
4. Types of Credit in Use – 10%
5. Inquiries – 10%
It's interesting to note that your net worth or your annual income is not part of your credit score calculation. There is no fundamental reason why a groundskeeper should have a lower credit score than a surgeon.
The reporting system is not perfect, so make sure to verify the information on your credit bureau report. If you find an error, you can take steps to dispute an item on your file.
For Equifax, you can call them at 866-349-5191, or visit their website to submit a dispute. TransUnion is another Canadian credit bureau to contact. You may need to contact both Equifax and TransUnion, as they don't communicate or transfer information.
For more info about Credit Reports, see our Credit FAQs.
Visit www.consumer.equifax.ca to order your report and score for a fee. And yes, you can repair your own credit. Most people, however, find that they do not have the time, persistence, knowledge, or patience. An option is to choose to have a professional handle the debt consolidation process instead.
We recommend debt consolidation over bankruptcy. In the vast majority of circumstances, the best course of action is to consolidate your debts, lower your monthly payments, and re-establish control over your finances.
Filing for bankruptcy has very serious consequences. Once you have filed for bankruptcy, your credit bureau will carry this record for at least six years — making it very hard for you to re-establish your credit. Additionally, many of Canada’s lenders will never loan you money again if they suffered a loss as a consequence of your bankruptcy filing.
There are lenders that will provide mortgages for clients that have been:
After bankruptcy, it can be a challenge to re-establish your credit. The best path forward is to get a secured credit card. A secured credit card requires that you provide funds upfront to the credit card provider. If you default on the credit card, the credit provider then keeps these funds.
To apply for a secured credit card, visit Capital One for their process. For more information about your Credit Rating, how to manage or improve your score, and what factors may affect it, check out our Credit FAQs.
Have credit questions? Here are some quick facts you should know.
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