6 Tip on How to Repair, Increase and Maintain Your Credit

General Lora Holmstrom 20 Jan

Credit scores are like report cards for grown‐ups. The score you get ranges from 300 to 900. Your score indicates your creditworthiness to potential lenders, banks, landlords, insurance companies, and even to some employers. The higher your score the better.

1. GET A COPY OF YOUR CREDIT REPORT

Make an inquiry once a year, twice is much better. If you are planning on purchasing anything that requires a credit check, keep track of your credit. This is something that is 100% in your control. As a consumer you have ability to make a soft/consumer inquiry to Equifax as many times as you want without it affecting your score. Here is a link to Equifax. If something doesn’t look right, contact the creditor immediately. Don’t wait to report an incorrect or fraudulent transaction. Is there an outstanding collection? If so, deal with it immediately, and by that I mean pay it. Then argue to get your money back. Do not leave this on your credit report hoping that it will disappear. No matter what, the collection will not be removed until it’s paid unless taken to litigation. Once dealt with, it will still take months to recover the points lost and 6 years to fall off your credit report.

2. NEVER MISS A MINIMUM PAYMENT

Because this attributes to 35% of your overall score, delinquencies have the biggest negative effect on your credit score. If you have overdue bills, make the necessary arrangements with your creditors. They would much rather work with you than file collections against you. If you can’t pay it all back, it’s better to pay some.

3. DON’T CLOSE UNUSED CREDIT CARD ACCOUNTS

Got a credit card that you have had ten years and hardly use? Keep it. It takes 12 years of history with the same specific card in good standing to crack 800 and enter that top 2% tier of quality credit. Cancelling a card can actually lower your score. Keep the old cards and only use them occasionally so the issuer doesn’t stop reporting your information to the credit bureaus. Having a long credit history helps increase your score. Don’t jump around to credit providers. Most ‘large’ providers have several different products. There is likely one that will fit your needs.

4. NEVER MAX OUT YOUR CREDIT CARDS

A good rule of thumb when considering building your credit is to keep the balance at or below 30% of the limit. Furthermore, a balance of 50% of the limit will maintain existing levels and over 75% will start to decrease it. NEVER exceed the limit, by even a $1.

5. DON’T LOOK FOR MORE CREDIT

Don’t shop around for credit or open several credit accounts in a short period of time. It raises alarms at credit bureaus and financial institutions, especially when you don’t have a long‐established credit history. Work with your existing creditors, as there is more relevant history. They are more likely to work with you, especially if you are looking to resolve some credit hardship(s). Always ensure you give your permission before allowing a credit check.

6. RULE OF 2

Ideally, you want to have 2 sources of credit solely in your own name for a minimum of 2 years with at least a $2,500 credit limit. This would be either 2 credit cards or one credit card and a line of credit. Ensure this is in addition to any joint accounts. Joint credit is only reported to the primary credit holders credit bureau and will not have any positive effect on the co-account holder.

If you ever have questions about your financial situation or want to discuss your credit score, please contact Dominion Lending Centres.

 

By: Michael Hallett

The Truth About The Cash Back Mortgage

General Lora Holmstrom 11 Jan

We often see ads from the major lenders offering cash back incentives on their Mortgage products.

Gone are the days where a Cash Back Mortgage could be used to facilitate a purchase without the required minimum of a 5% down payment. Cash Back incentives are now made available for other enticing uses; New Furniture and Appliances, Renovations and the other great hook…..Apply the cash back portion directly on your Mortgage for a better effective rate!

Just a few weeks ago, I was emailed an offer from a major lender who shall remain unnamed;

“NEW PROMO … Cash back for purchases. Effective 5 year Rate as low as 2.62%….”

First off, the Cash Back Mortgages are offered at a premium (higher) compared to other standard rates available. The ploy suggested by the lender here is pay it straight down on principle and lower your effective interest rate over time.

READ THE FINE PRINT

The kicker here and warning to all….there IS a catch! If you are to break the mortgage midterm, whether to sell your home or refinance, you not only have to pay the interest penalty, you also have to return the Cash Back portion to the bank. Even if you used it to pay down your Mortgage. This is in the fine print on the websites and in your contract for you to see.

I have seen this happen to a few people that I know and it ended up being a $10,000 – $20,000 factor in their decision not to move or change careers!

There are other more cost effective ways to obtain financing in better programs such as Purchase Plus Improvements, or Home Equity Lines of Credit (HELOC), that expose you to less future risk and still provide you with flexibility to accomplish your goals.

This is why you need a certified Mortgage Broker – like the fine folks at Dominion Lending Centres – working for you. We know of these programs and can offer advice on which ones most suit your situation.

By: Kris Grasty