BC Sunshine Coast real estate by Menno at Royal lePage Real estate on the BC Sunshine Coast

You have a credit score; do you know what it is? There’s really no shame in not knowing the correct answer to this question because interestingly enough hardly anybody can answer this basic question correctly.

From a young age, virtually all Canadians are taught to be prudent with credit and make sure you pay back on time. That's because we all want to have a good credit score.

Granted, it’s hard to keep up with the constant changes in your credit score – but even taking away the variation, most people still have no clue where they stand on this all-important topic. Even less people know how Canada’s credit score system really works. Yet we all (should) know that a high credit score is good for you when you want to borrow money.

Many of your financial actions and even some non-financial activities will be reported to the credit bureau combining into your personal credit score. It’s quite difficult to get a mortgage loan when your credit score isn’t great.  Still, some banks will look at how bad it really is. For instance: what else have you got: substantial assets or steady income?

In Canada, not having a credit score is about as problematic as having a bad score. This is why newcomers to Canada face an uphill financial battle.

WHAT AFFECTS CREDIT SCORE?

Credit score is a tricky thing. Some of your actions will affect your score without you even noticing it. It’s not easy to find out exactly what to do and what not to do. Mortgage eligibility is different for everybody and in each situation. Perhaps it’s time to seek out a reputable banker or mortgage specialist and see where you stand exactly. Even if you have a bad credit rating, that isn’t the end of the world. It can be fixed with a wee bit of patience and effort. Let’s talk about some suggestions to get going on this.

It’s easy to receive your own credit score from one of the credit agencies. The FREE report will also list certain transactions that may have had an effect on your credit score. You should check your credit score once a year. It’s a free service that’s available through Equifax when you can wait 10 days for the results to arrive in the mail. You got to learn what your current Beacon score is and what items appear on your credit report. Go to Equifax.ca or TransUnion.ca to get an up to date summary of your credit report.

Assuming you need to improve your score, do not open any new credit cards that you will not need just to try and increase your available credit. This approach could backfire and actually lower your score due to the number of inquiries (credit seeking). Fix any incorrect information that might appear on your credit report. If there is a discrepancy, notify Equifax immediately before it negatively affects your beacon score.

A credit score is linked to your Social Insurance Number but it's possible to probe your score without ever mentioning the SIN. Computers know how to put things together.

HOW DO YOU QUICKLY IMPROVE YOUR SCORE?

Try to keep your total account balances as low as possible. High outstanding debt will negatively affect your score. A safe range is 4%-12% of the total available credit.

If your credit is severely damaged, or you have a very short credit history, there are numerous ways to improve your credit score, over time. Consider gradually opening new accounts and always ensure that they are paid off on time. Make sure these accounts are ones that will be reported to a credit bureau.

If you need help building your credit from scratch or re-establishing credit after bankruptcy or a consumer proposal, take advantage of a secured credit card offered by your bank or your broker. These credit cards usually require a minimum deposit of $500 or more.

To minimize the number of inquiries on your credit report, don’t apply for multiple credit cards over a short period of time, or for a card you’re not likely to get. Apply for new credit accounts only as absolutely needed. Also, if you choose to shop around for a mortgage, you must be careful of the number of times the bank pulls your credit report. In that sense it’s smarter to visit a mortgage broker once and let them pull the credit record; then let them shop around to find you the best rate and conditions.

To be considered financially responsible, you have to make your payments on time and be known to not over-extend your financial abilities.

MAKING PAYMENTS LATE, HOW MUCH OF A PROBLEM IS THAT?

Make all of your payments on time. If for some reason you miss a payment, be sure to pay the following month. All late payments and delinquent accounts will be noted on your credit report and there is no way to remove them.

Another matter that’ll be important to bankers is collateral. For instance, even with the best credit rating and a very high income, banks won’t process a first mortgage loan in the amount of $250,000 on a $190,000 house. It would be bad business as well as illegal. The house gets appraised as to its market value – just to make sure that the bank will be protected.

Complicated or not, there’s a simple solution to the challenges surrounding the navigation of the credit mine field: you can retain an accredited financial expert.

Find yourself a trusted financial expert, mortgage professional or credit specialist and see what needs to be done to work on your personal credit score.

WHO IS QUALIFIED TO OFFER HELP?

Even at that, it’s never black and white what goes and what doesn’t. You should talk to a mortgage specialist or broker to get more details and to get pre-qualified and pre-approved. Your banking specialist will then need to make full application to a mortgage underwriter – that’s a person you’ll never see and probably never will talk to. They apply the rules and have some leeway. From there on, it’s clear sailing!

Please note that this blog article does not take the place of good, personal mortgage advice. You will benefit from what a professional in the field of mortgage and finance may have to offer you.

Mortgage financing is such a diverse (complicated) and interesting topic that you could study it for a very long time and still find new stuff. A specialist can point you in the right direction.

To those that know about money, it's actually a fun subject. Therefore, one way to MAKE it fun, would be to learn more about the topic. Below are some suggestions.

MORE ON MONEY; You can’t go wrong when deciding to learn more about these complicated financial topics. Below are some quick links to other blog articles that may also interest you.

How is it that low interests can help: http://www.mennorealty.ca/Blog.php/record-low-1

Do you require more real estate market knowledge? http://www.menno.ca/?p=19820

Just an average $151,000 mortgage: http://www.mennorealty.ca/Blog.php/mortgage-151000

Market stats for January 2013: http://www.menno.ca/?p=19931

The Canadian 80% rule: http://www.mennorealty.ca/Blog.php/80-or-81percent

How beautiful the Sunshine Coast is: http://www.menno.ca/?p=19877

Credit score and refinancing: http://www.mennorealty.ca/Blog.php/renewal-1