Understanding Your Credit Report

Understanding Your Credit Report

What is a Credit Report?

Your credit report is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money.

Understanding Your Credit Score

Canada’s credit bureaus calculate credit scores on a scale from 300 to 900. Your score will change as your credit report is up to date with the latest information. The higher your score, the more likely you are to be approved for credit- as a result get the best mortgage rates. Insurance companies also rely on credit scores as an indicator of risk.

It is important to know it, track it, and understand how it affects your financial options. Every lender has its own criteria for what constitutes a good score. Therefore the range you fall under is more important than the exact value.

Credit Score General Guide:

  • 760+: Excellent — In this range you will be offered the lowest interest rates and best terms on: mortgages, loans, and lines of credit. You have a long history of using credit responsibly, a mix of different types of credit, consistently paying on time, and keeping your account balances low.
  • 725 to 759: Good — This score signifies that you generally make most of your payments on time. Also your credit balances are somewhat low compared to their limits. You’ll still qualify for good rates almost anywhere. The one thing you need to watch is your balance-to-limit ratio is slightly too high.
  • 660 to 724: Fair — This score signifies default risk because you’ve hit a few financial bumps: late payments, too much debt, or account in collections. Creditors may give you a loan, but will charge you higher interest rates and may require a deposit or collateral.
  • 560 to 659: Poor — A score in this range flags you as high risk. So you’ll experience great difficulty obtaining new credit. If you’re approved for a loan, you’ll have to pay high rates. This is because of late payments to more than one lender, loan defaults, or bankruptcy. If you fall into this category, consider talking to a credit counselor.
  • 300 to 559: Very poor — Scores in this range are rarely approved for anything. To repair your credit, you should focus on reducing your debts, paying off any accounts in collection, making payments on time, and switching to a secured credit card to rebuild your credit profile. You should definitely seek the professional help of a credit counselor.

Additional Information:

It is possible to have a credit score of 0. If you’ve never opened any kind of credit account, or if all your accounts are closed or inactive and have fallen off your report after several years. If you have little or no credit history, getting approved can be difficult because lenders have no way to measure your level of credit risk.

You have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report, and go through it with you to verify that all of the information is true and correct.

Different lenders have different credit score or credit history requirements as a prerequisite for a mortgage loans. Many applicants don’t know what these requirements are, so they miss out on getting a great mortgage. Having a broker who is familiar with the mortgage landscape could be the difference in getting a good mortgage and a bad mortgage or no mortgage at all.

Our Sunlite Mortgage agents will walk you through the choices available, and help you identify the most suitable mortgage product to your current situation. If this isn’t currently possible, we will be happy to go over your credit with you to help find ways to improve your financial health and create a plan and a timeline for you to be qualified for a mortgage. Call us today at (877) 385-6267 LOANS or request a meeting so we can start your home ownership journey.

Mortgage Qualifier Calculator

The first steps in buying a house are ensuring you can afford to pay at least 5% of the purchase price of the home as a down payment and determining your budget. This calculator steps you through the process of finding out how much you can borrow. Fill in the entry fields and click on the payment schedule button to see a complete amortization schedule of your mortgage payments.

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