Your Canadian Credit Bureau report provides crucial information in your quest for the lowest mortgage rate in Canada. The primary source of information that the bank has on you is from this report. You need to know how to find the potential problems before the bank so you can be prepared for their questions.
Beacon Score
The first thing most bankers look at in your Canadian Credit Bureau is your Beacon Score. This is a summary of your credit worthiness as determined by an automated system at the credit bureau. Many bankers rely heavily on this score for loan/mortgage approvals and the interest rate you qualify for.
If you want the best mortgage rate in Canada, you should plan on having a beacon score above 600. If you have a score over 750 on your credit bureau report and have investments in addition to your home, you will be able to choose from the best rates, products and terms. A beacon score over 750 is considered excellent.
If the beacon score on your credit bureau report is below 600, you will face an uphill battle to get a mortgage. This considered a poor score. The rate is likely to be a little higher than normal, depending on your circumstances.
Credit scores can change daily. Depending on the situation, it may be fairly easy to increase your score and get approved at a good rate for your mortgage. An online monitoring service will keep you updated on where you stand whenever something changes on your credit bureau report.
There are some lenders who will look beyond just the beacon score in your Canadian Credit Bureau. Some banks will give the more experienced loans officers the authority to approve mortgages if a person has bad marks on their Canadian credit bureau report. A mortgage broker mortgage broker can help find a lender willing to offer a good interest rate if you have issues on your credit bureau report.
Collection Notices
Your Canadian Credit Bureau Report shows all collection, bankruptcy and Orderly Payment of Debt (OPD) activity for a full six years. It is important to pay attention to this section because disputed bills, old, forgotten bills and current collection activity shows up here. Banks will not give you a loan if there are unpaid bills in this section. Many banks will not even lend you money to pay off those bills. These must be cleared off your credit bureau report ASAP. The beacon score really takes a beating if you have an unpaid entry in this section of your Canadian credit bureau report.
Late Payment History
Late payments on your Canadian credit bureau report show up as an "R", "I" or "O" rating. The importance of the late payment shows up as a number from 1 to 9. A 1 is the best rating. It shows that you have paid your bill within 30 days of the due date.
An R2/I2/O2 shows an uncaring attitude toward debts. If you have one or two, no one cares. However, if you have several of them, bankers start to get nervous. The general rule is that a "2" rating is not serious, however, loans and mortgages have been turned down with as few as three "2's" if the rest of the mortgage application is not strong. The best source of evaluating the importance of "2" ratings is to have a conversation with a mortgage broker You may still qualify for the lowest mortgage rate in Canada.
A "3" rating on your Canadian credit bureau report indicates some financial problems. If it is current, you need to have a good explanation to get the best mortgage rate. If the "3" is one or more years old, you still need an explanation, but many lenders will try to overlook it on an otherwise strong application. If you have more than one "3" at any time within six years it may be a challenge to get the best mortgage rate, but you will still qualify for a mortgage somewhere. Contact your mortgage broker to discuss your situation.
A "4" or higher rating on your Canadian credit bureau report means serious trouble. If you have even one of these on your credit bureau report, many banks will not even entertain giving you a loan or a mortgage. Your best bet is to contact a mortgage broker and work out a strategy to qualify for a mortgage. It is highly unlikely that you would qualify for the best mortgage rate in Canada, but you may still qualify for a mortgage. If you have more than one "4" in the past year, the only way to qualify is to have a good explanation for it or have a cosigner. However, if the "4" is two or more years in the past and the rest of the application is strong, you may still qualify for the best mortgage rate in Canada.
A rating of "9" on your Canadian credit bureau report is as bad as it gets, other than a bankruptcy. Most lenders will not provide a mortgage with someone that has a current "9" rating. However, there is still hope. A good explanation combined with the mortgage broker's recommendation to the right lender may do the trick. He/she may still be able to get you a good mortgage rate. If the "9" rating is two or more years old, most lenders will shy away from the deal, but your mortgage broker may know of a lender or two who would be willing to provide a mortgage for you.
Bankruptcy
A bankruptcy showing on your Canadian credit bureau report is a serious thing regardless of how long ago it happened. If you have only had one bankruptcy, the listing on the Canadian credit bureau report will disappear at the end of the sixth year. However if you have had more than one bankruptcy, all of them will be on your Canadian credit bureau report forever.
If you have had one bankruptcy, you may still qualify for a mortgage soon after the bankruptcy. The trick is to get establish a good credit rating right away. You can get a secured credit card, a car loan, a furniture or appliance loan etc. at high interest rates. If you are fortunate enough to be reading this before you decalare bankruptcy, try to continue payments to a couple of creditors (like your home and car) through the bankruptcy. If you can do this, you will be able to get new credit soon after the bankruptcy. It won't be easy, but your mortgage broker may be able to help you. Even if you haven't been able to keep some lines of credit open through the bankruptcy but have re-established some credit, you may still qualify for a mortgage. The mortgage interest rate may be a little high, but at least you would be able to own a house.
If you have too many debts showing on your Canadian credit bureau report you may still have a chance of qualifying for a mortgage. One way to handle it is to somehow consolidate your loans. Another way would be to get a cosigner to add income to your application. You may also have some income that normally doesn't show up on your income tax return that can be used by some lenders. A more complete discussion of income can be found on the Mortgage Calculator page.
Your mortgage broker would definitely be a good resource if you have a strong Canadian credit bureau report but the debt load is a little high. Even if your own bank has turned you down, if there is a way to make the numbers work, your mortgage broker will find it.
Many times when the debt load is starting to build up, you may go over the limit on your credit cards. The credit company is happy to let you do this once in a while, but your beacon score really takes a hit. Whenever possible, stay at least 30% below the limit on your your credit lines/cards. If you can do this with all your credit, the Canadian credit bureau report will reward you with a very good beacon score and the bankers will be chasing you to give you more and more credit at the best terms they can offer.
