Credit Reports
Its been a while since I wrote about the importance of your credit report. This topic popped up twice this week so I think a refresher is not a bad idea.
When we submit a mortgage application lenders look carefully for a few specific things:
- Is the home you are looking to buy or refinance readily marketable / appeals to a wide range of potential buyers?
- Do you have your down payment in order?
- Do you have consistent income to repay your mortgage?
- Does your overall financial profile show you manage yourself responsibly?
- Does your credit report reflect a history of payments made on time and as agreed?
When they are reviewing your credit report they are also looking for a few specific things.
- How long have you had active credit facilities (credit card/line of credit/mortgage etc)?
- Do you have a history of making your payments on time?
- Do you pay most of your credit card balances off regularly or do you run with cards maxed out all the time?
Lenders fully understand that sometimes life happens and we can sometimes explain one-off blips or issues. If you have a consistent history of late payments that can become a bit more challenging to explain.
One thing that I chat about with my clients is how making your credit card payment a few days ahead of your statement cutoff date can really help boost your score.
Over the last few years it has become more common that people use their points cards for everything over the course of the month then pay their card in full once they get their statement. If you operate your credit card this way your credit report only picks up the balance as reported on your statement so it can look like you are always carrying a significant balance even though you always pay in full.
For most people this is not a big deal, but if you are working on improving your credit score this small tweak can have a huge impact.
The other issue that popped up this week was incorrect information on a client’s credit report. Part of her first name was missing and the birthdate was incorrect.
The client was able to confirm everything on her credit bureau for me right down to previous addresses, employers, and old loans that had been paid off.
Lenders would not move forward until her credit report was corrected and in this case because two items were wrong the client needs to correct it herself (normally we can help make changes fairly quickly).
Its always a good idea to review your credit report at least once a year to make sure that all of your information is reporting correctly. If there is an issue you can catch it early and correct it before you are in a panic midway through a mortgage application.
Changing topic a wee bit as my daughters are on evacuation alert already …
If you are in the process of buying a home as we move into fire season please make sure you have a clause in the agreement as to what will happen should there be an active fire nearby. Nail down your home insurance as early as possible because once there is an active fire close by securing an insurance policy can be very difficult if not impossible.
