Financial Information

Credit score formulas have recently changed affecting mortgage quotes and the qualification of borrowers when financing a home purchase or refinance . Here are the main changes:

1. Ratio of Balance to Limit

The ratio of account balance to the amount of credit available appears to have more influence on the credit score formula. The less credit available that a borrower has on credit cards, the lower the score would be. More available credit would mean a better score. This change could have a broad impact on credit scores used by mortgage lenders to qualifying borrowers, if credit card issuers implement more cuts on their maximum limits. It doesn’t matter if an account has a balance or not, credit scores may drop if the available credit limit is lowered.

2. Number of Credit Accounts

It used to be that having too many open credit card accounts was viewed as a negative factor. However, it appears that has been reversed, provided that the accounts have not been delinquent or overused. Now, having more open and active accounts could have a positive effect on credit scores under the new scoring system. More credit card lenders can close seldom used accounts, which is a potentially negative effect. From a mortgage lenders perspective, underwriters will also have to change how they view borrower credit files.

3. Isolated Issues Counted Less

The new credit score model will apparently be more forgiving to mortgage borrowers who only have one major negative problem on their credit report. The scoring model calculates the severity and frequency of negative credit items. Depending on the item reported, isolated problems will have less impact on credit scores, as opposed to continuous and recurring late payments and delinquencies. The potential upside of this change is that good borrowers will not be lumped into a category of repeat offenders.

4. Small Collection Accounts

Collection accounts with an original amount of less than $100 are disregarded. Another positive benefit for borrowers with minor debts owed from parking tickets, unpaid library fines, small medical bills, or other disagreements. Infractions like these should no longer affect credit scores.

5. Authorized Users on Account

The previous FICO credit score model allowed for authorized users on credit card accounts to build a positive credit profile without being the primary card holder. While some authorized user data is allowed, the new formula has reduced the ability to build credit based on this method.

Credit bureaus are watching your payment punctuality, and other personal financial information that directly impacts your ability to qualify for a loan, and the interest rate you will be offered. A credit score of 720 or better can provide the lowest interest rates, while a score of 620 or less can result in high interest rates.

Common Issues that Drop Credit Scores

1. Late Payments - Not considered late until 30 days past the due date. 60 or 90 day late payments are more negative than a 30 day late. The age of late payments can influence credit scores. Recent late payments are considered worse than older ones. More serious issues include: consumer credit counseling, collections, bankruptcy, and foreclosure.

2. Outstanding Debt - Having a large number of open accounts with balances may reduce your credit scores. Another issue is the ratio of your credit limit compared to the current balance. Using 75% of your credit limit is a greater risk than using 25%.

3. Account History - Older credit accounts can have a positive effect on credit scores, as long they are not delinquent. Having recently opened accounts could reduce your scores. Also, multiple credit inquiries are a flag indicating a possible new account.

How To Fix Credit Report Errors

Incorrect information can sometimes appear on a credit report. If you believe there is a potential error on your credit report, you are entitled to dispute the accuracy of the information. The federal Fair Credit Reporting Act gives you the right to challenge inaccurate information by contacting the reporting agencies, and the company who reported the information. Under the FCRA, they are responsible to correct any errors on your credit report free of charge, and within a specific time limit.

The credit bureaus, Experian, Equifax, and Transunion, are required to investigate your dispute within 30 days of reporting the potential error. They will contact the source of the derogatory information and try to confirm the record. Providing documentation to support your claim, if you have any, can also expedite the process. If the credit bureaus are unable to confirm the derogatory information from the source, the item must be removed from your credit report, which can improve your score.

Mortgage Refinance, Mortgage Quotes, San Marcos New Homes

There is an immense complexity that has enveloped mortgage rates in Canada over the past few years. One of such convolutions is the massive dependence of the Canadian market on credit scores for the procurement of a good rate of mortgage. Literally, the higher the credit score, the lesser will be the rate of interest. Rates could be almost 3% different between good credit and bad credit. How Do Lenders Take Out Credit Scores?

The Factoring of the total credit score is pertaining of setting up a mortgage Canada rates by amalgamating these factors:
repayment record
• duration of the credit history
• the available credit and the sum owed
credit cards, loans, car loans, lines of credit are all types of credits used
Here is a sneak peek at how the aforementioned factors can affect your ability to bargain for good mortgage Canada rates:

Non-Payment Of Loans

Paying off loans obviously reflects the positively towards your credit score, helping you get an better mortgage rate. paying back your loans sooner will show that your ready and capable to repay debt.
Also, if you have a non-mortgage debt, make sure you pay it back as quickly as possible so as to improve your credit score and get better mortgage Canada rates.

Credit History

The age of the loan you take directly affects your credit score. According to the experts, loan takers, with shorter credit histories, have a bad repayment risk than consumers with longer credit histories. Moreover, people who open new accounts on a regular basis have bigger repayment risk than consumers who do not involve themselves in such practices. Hence, if you want to strike lucrative mortgage Canada rates, it’s important you pay debts on time. This will improve your credit score immensely.

The Available Credit And The Sum Owed

People with bigger credit amounts are automatically put into the future repayment risk category than consumers who owe lesser money. It results in the score calculating the total non-mortgage debt a person has still left to pay back.

Normally, the sum total of a consumer’s outstanding amount on his/her last statement is the amount that gets reflected in the credit report. Moreover, even if the installment is paid in full every month, the credit report will only reflect the balance of the last billing statement.

To summarize, paying back debts and keeping low balances will assist to enhance ones credit score, which in turn will provide better mortgage Canada rates. Consolidating, however, does not increase the score, since the same amount remains outstanding.

Tips to enhance your credit score for a better Mortgage Canada

• Getting in touch with the creditors to get the errors on the credit profile rectified
• Evaluating ones credit report annually
• Keeping the balances less than 50% on the credit cards
• Taking a credit only when it is really needed
Paying off your loans as quickly as possible.