Archive for March, 2013

How Your Credit Score Is Calculated

Thursday, March 21st, 2013

Your Credit ScoreYour credit score is a number which potential creditors use to determine if and how you will pay your debt. Your credit score is calculated using your credit history. When you apply for a mortgage, lenders use your credit history and score to make their decisions.

Scores range from 300 to 950.  If you get a score of 750 or above you’ll qualify for the best loan rates and terms. If you get 620 or lower, you’ll pay higher rates IF you qualify. The absolute minimum credit score for insured mortgages is 620.

In determining a credit score, a number of factors in your bill-paying history are considered:

Payment history – approximately 35%

Do you pay your bills? Tardy or missed payments, collections, and especially bankruptcies all affect your payment history. If you have not paid bills in the past, but are paying on time now, this will be factored into the equation.

Credit utilization – approximately 30%

Credit utilization involves the amount of debt you currently have in comparison to the credit you have available. The higher your credit utilization, the lower your credit score will be. Keep your credit card balances at less than 30% of your credit limit.  For example, if you have a total limit of $20,000 on your credit cards, you need to keep the balances under $6000.

Credit history – approximately 15%

The longer your credit history the better.  Don’t close credit cards or bank accounts that you’ve had for a long time.

Credit History Inquiries – approximately 10%

Every time you apply for for credit, the inquiry is added to your credit report. Too many applications put up a warning flag to lenders.  For example, if you are shopping for a mortgage with a number of banks and finance companies each one will request your credit history.  *One of the benefits of working with a Mortgage Broker is the fact that we only ask for your credit history ONCE!

Only those inquiries made in the past year are part of the credit score calculation.

Mix of credit – approximately 10%

Though this isn’t a significant part of the equation, having a mix of different types of credit is a good thing.  For example credit cards, personal bank loans, and a car loan show a range of credit situations that include installment and revolving credit.

Make sure you have at least one credit card as soon as you are eligible, but don’t take out other loans just to improve your credit score!

If you are applying for a mortgage with us, we will request your Credit Score.  We can discuss the results with you and let you know if you need to improve your score and how to do it.

Call Justin at  604-736-1855

Owning a Home Has Become Slightly More Affordable

Sunday, March 3rd, 2013
Vancouver house for sale

According to a new report created by the Royal Bank of Canada . . .


Owning a house became slightly more affordable in Canada during the second half of 2012, but that’s mostly due to rock-bottom mortgage rates.

The sharp drop in house sales that occurred during the final six months of the year led to some small month-over-month declines in house prices in many cities. And, as sales fell, banks made further small cuts to their already-low mortgage rates. Those two factors helped to take a tiny bite out of the cost of home ownership during the final three months of the year, for the second quarter in a row.
Of course, The Bank of Montreal had to wade into the discussion, saying . . .
. . . the latest data suggests falling mortgage rates and rising incomes are offsetting the effects of high house prices in most markets.
BMO senior economist Sal Guatieri went on to say  that policy makers must . . .
“remain vigilant,” pointing to a number of major exceptions, namely the markets for detached homes in Vancouver, Toronto and Victoria, each of which are vulnerable to a significant correction if incomes fall or rates rise.
The Globe and Mail’s Michael Babad takes a look at the latest housing affordability numbers in a video titled:  Can you afford a home in Vancouver or Toronto?
Vancouver housing market video
The bottom line?  Though mortgage rates are now at the lowest they’ve ever been, this could change in an instant.  If our economy goes down for any reason, or if interest rates rise, you might be blocked out of the marketplace.

Our advice?  It’s spring. If you’ve been considering a new home purchase, now is the time to get a pre-approved mortgage, lock in your rate, and start house hunting.




Read full Financial Post article here