Credit Reports – The good, the bad, and the ugly

Credit Reports. I know what you’re thinking. What can be more exciting than talking about credit reports right? Well thats why I’m here to make it a bit more interesting than your average person talking about them would.

Yesterday I sat in on a presentation by CMHC which discussed the importance of ones credit report. Here’s what I gathered from it all.

One major thing that came about was the misunderstanding that if your credit is constantly checked, it negatively affects your credit score. This is slightly misleading. When you are searching for a new rental and or a mortgage for a new home, each time your credit gets checked, it is documented however similar checks into ones credit gets bundled together and only impacts your actual score once. So that means you can apply to 10 different mortgage companies at once if you like and your score will only be impacted as though it was one incident.

So you have bad credit, like most of the population, or maybe even no credit and youre looking to buy a home. Just because you can’t buy one right this second doesn’t mean you can’t get yourself in shape to buy one in the near future. Here are some tips on how to get yourself back into decent credit standing.

If you are a newcomer or borrower with no credit

• get a credit card
• pay your bills on time
• open a bank account and use it frequently

Maintain and improve

• Avoid changes in employment and your residence
• always pay bills on time
• pay bills in full on or before due
• pay debts as quick as possible
• keep balance below the limit(it is suggested to keep your credit cards below 35% of the limit so it doesn’t negatively impact your score)
• reduce the number of credit applications
• contact creditors immediately if they are having trouble making payments, do it before to late

So what affects your credit score you ask? Here is what the score is mainly compiled of:

• 35% – Payment History(do you pay your bills, and on time?)
• 30% – Use of available Credit (Are all of your cards maxed out most the time?)
• 15% – length of credit history (Did you just get a credit card?)
• 10% – number of recent inquiries made about credit report.
• 10% – type of credit being used (Phone bills are sometimes uses, utilities usually only once they hit collections)

It’s also suggest that you pull a credit report on yourself. It is FREE in person or to have it mailed to you. One should get their report at least once a year to verify info is up to date and correct.

Scores

• 300-559 = POOR
• 660-774 = GOOD
• 760+ = EXCELLENT

CMHC’s average credit score in their portfolio is an astounding 724!

www.fcac-acfc.gc.ca to further understand your credit report

Or feel free to give me a shout whenever you like.