Give Credit When Credit is Due – Understanding Credit Reports

Understanding Your Credit Report and Credit Score

Understanding Your Credit Report and Credit Score

Here are my notes from a recent Continuing Education Course held at my office by Beverly Gorman from CMHC – Understanding Credit Reports. Managing credit is important if you are going to be applying for credit. To manage your credit you have to have an understanding of how the credit process works, what exactly is a credit report and what is used to calculate your credit score. In relation to the Home Buying aspect of mortgages, having a higher credit score through responsible credit management can translate to savings with better mortgage rates and terms. The notes below are in abbreviated form from the points gleaned from the presentation. More information is available through the website links below.

5 C’s – capacity, capital, collateral, character, credit history
Capacity – cash flow, gds (gross debt service), tds (total debt service) ratios
Capital – assets, home equity
Collateral – security against the loans
Character – age, spending habits, lifestyle, job security
Credit history – history of credit, LOC (line of credit), credit cards

Credit history
– payment on time, takes a long time to get rid of negative info, much longer than it takes to build it up with good credit behaviour
2 major Canadian reporting agencies, Equifax and TransUnion – rent check for tenancy (only rentals)
– pulling report gives a better snapshot of the borrower
– pulling your own credit report is a soft hit, no impact to credit score – same about employment and insurance
– consent to pull credit report can be verbal or written, implied if told that report will be pulled
– info to pull – name, date of birth, place of residence – with SIN narrows it down to the individual.

Credit Report
– contains the following: personal info (aka, 3 previous residences, time credit report started, past 3 places of employment, SIN, date of birth), banking info (negative info such as account closed by credit grantor, pulling back credit, NSF charges), credit information (history of credit, loans, leases), public records (liens, family responsibility hits), collection information (judgements, only one collection per account at a time), consumer statement (Bill 152, consumer statement on your credit report for dispute/litigation, put an alert on lost/stolen wallet/purse with phone number), credit report inquiries (any time report is pulled added to the list, hard vs. soft hits that combine multiple same type of inquires into one when done in a couple weeks of another).
– codes used: I installment, O open account, L lease account, C line of credit, R revolving or recurring (credit cards), M mortgage (Equifax reports about 85% of mortgages with info only available to those that give mortgages, no lender info or maturity date to reduce poaching of clients)
– numbers used: 0-9 – 0 too new, 1 pays as agreed, 2 late 31-59 days, 3 late 60-89, 4 late 90-119, 5 more than 120 but not yet a 9, 6 not used, 7 regular payment on consolidation, 8 reposessed, 9 bad debt/placed for collection/bankruptcy
– time frame for negative info (TransUnion in brackets) – six years for most credit transactions, secured loans, banking items, judgements (7), collections, bankruptcy (7), can negotiate to fewer years with consumer proposal (3 years) – no new debt applications when in consumer proposal.

Credit Score – shows the risk for the borrower, scale between 300-900: poor 300-559, fair 560-659, good 660-724, very good 724-775, excellent 776-900
– delinquency rate is 90 days past due, rates increase depending on lack of credit score.
– for CMHC financing, minimum of high ratio scores is 600, some exceptions to the rule but very hard to get
– factors that influence the credit score: payment history (35%), use of available credit (30%), length of credit history (15%), number of recent inquires/new credit (10%), type of credit being used (10%)
– best way to boost score is to utilize up to 35-50% of credit available and pay by the due date.

When is more info needed?
– when 1 + 1 = 3, when something doesn’t add up, appears to be fraud
– Red Flags – credit utilization vs employment/income, employment vs. income, residency vs. employment/income, new credit applications, many inquiries, limited trades can be indication if bankruptcy

Advice to Share on How To Build Up Credit Score
– Newcomers or new clients – get a credit card, small loans, always pay bills on time (in full if possible), open a bank account and use regularly, stable employment/residence, utilize no more than 20%.
– Advice to help/maintain/improve – same as newcomers as well as – pay off quickly, keep balances below the limit, reduce the applications, make contact immediately if having problem making payments.
Advice to share with those with existing credit history: check credit report every year, verify information is up to date and correct, order from both agencies, get errors corrected with institution and agency.

Publications to share with clients: – Government of Canada – Financial Consumer Agency of Canada – document Understanding Your Credit Report and Credit Score – Equifax Personal Solutions – Trans Union Canada – Canada Mortgage and Housing Corporation

One more thing, Emily is the name of the computer system at CMHC.

The Price is Right Rules – The Biggest Danger of Over-Pricing Your Home

When playing a guessing game on the price or quantity of something, I usually qualify the guess as being subject to The Price is Right Rules. Simply, The Price is Right Rules is guess the amount being closest to but without going over. The amount of the dinner bill (loser to pay), price of a car, number of jelly beans in a jar or the price of a house that was just listed for sale are all examples of how important it is to be close to the answer, but you can’t go over!

The Price is Right Rules - The Biggest Danger of Over-Pricing Your Home

The Price is Right Rules – The Biggest Danger of Over-Pricing Your Home

In looking up what some other industry professionals had to say about the danger of over-pricing your home when listing it for sale, there were a few dangers listed in almost all the articles I read – Showings with no offers (or no showings at all), helping to sell the competition, becoming stigmatized from being on the market for an extended period of time, losing the initial New Listing excitement bump, and not having the right Buyers looking at your property.

With the recent passing of Don Pardo I have been hearing about all the work he has done in his illustrious career, from being THE voice of Saturday Night Live to his work on the original The Price is Right. I grew up watching Saturday Night Live and his distinct voice was the way every episode started with G. E. Smith and the Saturday Night Band rocking in the background. I didn’t know that Don Pardo had worked on the original The Price is Right as I grew up with Rod Roddy and Bob Barker. The contestant that is closest to the actual retail price without going over will be the winner. Remember to have your pets spayed and neutered, good bye everybody! What does The Price is Right have to do with over-pricing your home?

One of the things I get asked all the time in regards to Real Estate is “Why isn’t that house sold yet?” My answer is usually the same: PRICE. The realistic asking price of a newly listed home is the most important aspect of whether or not it will sell, either quickly or at all. The Price is Right Rule as it pertains to the listing price of a home is a simple correlation – go over and you lose. You want to be as close to the market value without going over to maximize your chance of winning. Of all the dangers that befall you from over-pricing your home, the biggest danger is you not getting as much money as you could. Possibly not selling your home at all, or having to reduce your price until you have a realistic asking price which could be forced even lower if you start above what the market will bear, after which you are dealing with all the problems that come with over-pricing from the start.

Playing the guessing game with the Price is Right Rules is fun, but don’t gamble when it comes to selling your home. Contact me if you are in need of honest, professional Real Estate services. I look forward to Helping You Home.

Digital Signatures – Please sign on the … screen?!

The digital revolution is here!

The digital revolution is here!

A revolution is coming to how Real Estate transactions will be conducted in Ontario. Currently awaiting proclamation is an amendment to the Electronic Commerce Act (ECA 2000) from the June 11, 2013 passing of the 2013 Ontario budget that allows for conveyences of land to be confirmed with digital signatures. Here is a link from the Ontario Real Estate Association outlining these changes. In essence, once this amendment is proclaimed, you will be able to do all the “paperwork” required to buy or sell a property in Ontario via an electronic device.

Digital signatures are currently allowed for all other Real Estate forms except those that convey (transfer) ownership of property, namely the Agreement of Purchase and Sale (APS) and other forms directly related to the APS (waivers, fulfillment of conditions, amendments). Agency forms (Buyer Agency Agreements, Listing Agreements, Working With a REALTOR©) can be signed using digital signatures and have the same legal affect as those signed with pen on paper.

So how will this change the way Real Estate is conducted? Imagine you are out viewing a house that you would like to make your home and would like to put in an offer to purchase. No longer will you have to drive back to the REALTOR’s© office, print out six copies of the offer and go through to initial and sign each of those copies. Using a digital tablet (such as an Apple iPad, Samsung Galaxy or Blackberry Playbook) your REALTOR© could load the required documents, go over the specifics of the offer and get your digital signature then and there. A copy of the offer you just signed could then be emailed directly to you and also sent to the Listing Brokerage to be presented to the Seller. Today’s Real Estate market is fast-paced and there seems to be Buyer competition for most listings. Having the ability to submit your offer as quickly as possible is a benefit to the Buyer.

Technology has evolved and radical changes are coming to the way things are done. I welcome the change and look forward to using the new tools that will be available to best serve my clients. Soon it will be the finger, and not the pen, that is mightier than the sword.

Real Estate – Helping You Home

I have been a licenced Real Estate Sales Representative (Realtor) in Ontario since June 5, 2003, a little over 10 1/2 years. I have helped many people lease, buy and sell all types of homes with each transaction being a learning experience as no two deals are the same.

After my 10 year anniversary I really looked back and reflected on what Real Estate is really about. For me it is more than just my job or my profession. Real Estate is more than what I do to earn a living and provide for myself and my family. I take great pride in the services and expertise I can offer in the process of buying and selling Real Estate. I enjoy helping people go through all the steps needed to ensure a smooth move. I like sharing my knowledge with others to help fulfill their goals and dreams. Real estate is not only about the property, it is also about the people.<br />

Toronto Skyline Sunset

Caledon Farm Sunrise,

Caledon Farm Sunrise

I live in Caledon East and now work mostly in the Caledon and surrounding areas. My experiences have taken me to different areas of the province and I have helped many clients buy and sell in both urban and rural settings. From lakeshore condominiums in Etobicoke to family farms in Hawkestone to in-town homes in Bolton and many other places in between, I possess real experience dealing with a multitude of property types and the specific issues pertaining to each.

If you are thinking of making a move, know someone that is and needs some help, or if you have a real estate question, please contact me through my website at or directly via telephone at (905) 857-7653. I would be happy to help you however I can.