18 Dec

6 Ways to Increase Your Credit Score

General

Posted by: Kim Banting

Have you ever wondered what your credit score is or how it’s calculated?

Your credit score is a three-digit number between 300-900 that lenders use to predict your creditworthiness. Credit reporting companies calculate your score based on your payment history, how much you owe, how long you’ve had credit and how often you apply for new credit.

In general, the higher your score, the less likely you are to become delinquent on credit. If it’s above 680, you’ll probably qualify for a standard loan, but if it’s lower than that, you may have trouble getting new credit.

If your score is lower than you’d like, here are 6 ways to raise it…

1. Check your credit report regularly – at least once a year and make sure your report agrees with your records. Correct any errors you notice as soon as possible and watch for signs of identity theft. There are two main credit reporting companies in Canada: Equifax and Trans Union and their reports can be different from each other, so it’s good to check with both companies – even though they do charge a fee. Free credit checks from Credit Karma are not accurate and may not reflect reports from Trans Union or Equifax. And, if you are thinking about applying for a mortgage, it’s especially important to check your report a few months in advance. That way, if your score is on the low side, you have some time to raise it.
2. Make sure your credit limits appear – If your credit card limits aren’t listed, your cards are assumed to be maxed out – and this damages your credit score. Ensure your limits are indicated and stay well below them to maintain a higher score. If you can keep your balances below 50% of your available credit, that is best. For example, having two credit cards with $3000 limits and balances of $1000 is much better than having one credit cards with a $3500 limit and $2000 balance. Make sense?
3. Pay ALL of your bills on time! I know that this can be difficult, especially in a pandemic, if your income has been impacted. However, if you have been falling behind, take care of past due accounts first – delinquent accounts reduce your score more than anything else.
4. Pay new liens or charge-offs (debts that your creditor thinks is not likely to be collected) – These are your next priority, however, if they are older than 24 months they have already done their damage. While you may still need to address these, your effort will be better focused on the other suggestions I’m discussing.
5. Don’t cancel your credit cards – credit scoring software totals your available credit limits across all your cards. If you close a credit card, suddenly you have a total lower limit which means your credit to debt ratio is higher. This drives down your score. An exception to this rule is if you know you don’t have self-control and know you will max out these cards and not keep up with payments.
6. Keep your old cards active – the longer you’ve had an account open, the longer your average credit history and the less likely you are to default on it. But it’s not enough to simply keep these accounts open, you have to use the card – even if it’s only a couple of times a year. Keep these old cards open and don’t apply for credit you don’t need – too many inquiries over a short period of time can reduce your score.

I hope you have found this helpful. If you have any questions about your credit score and want help, please call me and we can set up an appointment to chat about which options will work best for you.

Sincerely,
Kim

1 Dec

Insurance in the Mortgage Industry

General

Posted by: Kim Banting

When you are signing the final papers on your home purchase, you will almost certainly be advised about insurance. There are 4 types of insurance in the mortgage industry, and it can be confusing to differentiate between them and what you actually need. For example, if you already have life insurance, do you really need mortgage insurance as well? Let’s break it down so you can understand what each type of insurance offers and make the decision that’s right for you.

1. Mortgage Loan Insurance: AKA Default Insurance, this type of insurance is paid by you, but it’s there to protect your lender in the event that you can’t make your mortgage payments. When do you have to pay this? When you are buying your home and have less than 20% down payment. How can you avoid paying this? Have at least 20% to put down on your home. The only way Default Insurance benefits the borrower is when you really can’t come up with that 20%, you can still get approved and it helps you get a better interest rate. Generally, the premium is added to the loan amount and paid back over the life of the mortgage.
2. House Insurance: This is the insurance you get to protect you in the event that your home is damaged due to fire, theft, weather damage, etc. This insurance is always required by the lender, because not only does it protect your investment – it’s also protecting theirs.
3. Mortgage Life/Disability Insurance: We never expect anything bad to happen. We all plan on living long, healthy, boring lives – except that isn’t the way life works. Life/Disability Insurance ensures that your mortgage gets paid if you ever have an accident that prevents you from working and being able to make your payments. There are different types of policies available and some of you may even have a policy like this from your employer. It’s important to review the policy and understand exactly what is and isn’t covered. Term life insurance policies with sufficient death benefits can often cover both your mortgage and life insurance needs, but it does cost more and you have to qualify. Talk to a licensed Insurance Agent to get informed and know what you need.
4. Title Insurance: Title Insurance protects the property owner and the lender against any losses that are related to the property title. Title issues include liens, errors in public records, missing heirs, forgeries/fraud, boundary disputes and so on that prevent you from having clear ownership of the property. Not always required, but some lenders may make this a condition of financing. It’s a good idea to speak with your lawyer or insurance provider for more details and to determine if it’s the right choice for you.

Love it or hate it, having insurance is often a necessity and at the end of the day, can give you a feeling of security, knowing you and your family are protected no matter what comes your way.

Sincerely,
Kim