Emil Khattab - Exceeding Expectations - One Property at a time

The Importance of Good Credit



There are a number of steps to getting mortgage financing. A particularly important step and one many people don’t give much thought to – is the credit check. As a routine part of the application process your lender will order a copy of your credit history.   Your personal credit history is compiled by credit bureaus which collect information from various sources including banks, retailers and other public records, creating a credit report. Your credit report shows data going back as long as 7 years, and will contain information such as:


  • Credit and Debit Cards you own
  • Account Types you have at various Financial Institutions
  • Information about Personal Loans, Mortgages, Student Loans, etc.
  • Creditor Names and Account Numbers (eg. MasterCard, Visa) and account start dates
  • Account Balances and Payment History (eg. How many times you were 30,60,90 days overdue on your bills)
  • Marriages, Divorces, Liens, Judgements, Bankruptcies
  • Inquiries Made by other Creditors


How Lenders Use your Credit Report


The lender will examine the credit report to aid in determining whether to lend you money. If the lender has any concerns about something on the report the lender may ask you for an explanation. Though lenders usually work as quickly as possible in processing mortgage applications – the process can be slowed down if the lender needs to go back to the applicant for an explanation concerning items on a credit history. So don’t be discouraged, but be prepared to answer questions the lender may have – often a simple explanation will do.


The lender will also use the report to verify other information on your mortgage application, for example: information about your employment status, your address (including the name of your landlord and perhaps rental payment history), etc. This information might be useful to a lender to show what other avenues of financing you might have tried and it may raise questions about why another potential creditor declined to lend it to you.   To best maximize your chances of getting the funding you need to facilitate a home purchase, keep these tips in mind:


  • Honesty is the Best Policy. Hiding details of your credit history to your lender will only leave you open to getting caught down the road, not to mention ruining any chance of obtaining financing. There is no point in trying to hide anything that will show up in your credit history anyway. If you think there might be any credit problems – tell the lender up front and ask about the lender’s policy prior to applying for the mortgage.
  • Prepare Yourself In Advance. By getting a copy of your credit report before you apply for a mortgage you’ll be better prepared to avoid surprises and possible delays in your application for financing. Since the report contains information about you, you can easily obtain a copy of it via Equifax, one of Canada’s largest credit bureaus. Visit www.equifax.ca to get your copy today.
  • Analyze Your Report for Errors. Your credit report should show your financial capability in the best light possible. If you disagree with something in your credit history you have the right to challenge it and ask that the information be corrected. For example, perhaps the report shows that you were over 90 days late paying a bill but the report does not indicate that you withheld payment pending a settlement of a dispute with the creditor. OR perhaps you were late with a particular payment because you were away. Whatever the explanation, contact the credit bureau to attempt to clarify the matter and have the file corrected. Equifax, for example, ensures that file correction procedures to personal credit files are made within seven days, and they send amended copies of your history to any company that has received your credit report in recent months.
  • Build Your Credit & Pay your Bills on Time! First of all you won’t get credit unless you have credit history, so build it! One of the best ways to build your credit history is by obtaining credit cards. But don’t overspend and pay your bills on time! A credit report marred with debts and late payments can severely jeopardize your chances of getting a mortgage. Boost your chances by showing your lender you are financially responsible and can pay your bills on time.