Certain buyers don't understand credit

Certain buyers don't understand credit

Certain buyers don A recent study points to the importance of advising clients on the impact credit scores have on attaining a mortgage – especially for millennial home buyers.

The study by CFA, an American non-profit consumer organization, found that participants aged 18-34 know less about how credit is scored and what effects their actions will have on their score.

It’s an issue many brokers face when trying to advise clients on the importance of maintaining their credit score.

“Usually if someone is looking to buy we can take three to four months to repair their credit,” Joe Walsh of Dominion Lending Centres Bedrock Financial told MortgageBrokerNews.ca. “I tell clients they should try not to bring their credit to its limit and to keep it around the mid-mark.

Also, the number of credit items can have an effect as well; they can close some credit if they aren’t using it.”

However, although Walsh has experienced some push-back from clients who are unwilling to work on their own credit, he says younger buyers are often the easiest cases.

“Trying to work with someone who is younger and is just coming into credit is easiest,” he said. “It’s an uphill battle for those who have struggled with it for 15 to 20 years.”

According to the study:
  • Well over four-fifths know that credit card issuers (88%) and mortgage lenders (87%) might use these scores.
  • Well over four-fifths know that missed payments (92%), personal bankruptcy (87%), and high credit card balances (87%) are factors used to calculate credit scores.
  • Nearly three-quarters (72%) know that they have more than one generic credit score.
  • Nearly three-quarters (72%) know that the three main credit bureaus – Experian, Equifax, and TransUnion – collect the information on which credit scores are most frequently based.
  • Nearly three-quarters (72%) know that it is very important to check the accuracy of one’s credit reports at the three credit bureaus.
 
 
11 Comments
  • David O'Gorman 2014-06-03 11:38:41 AM
    There are two issues here:
    1) Having the credit score that qualifies to get a mortgage.
    2) Maintaining that score from "commitment" until closing.

    In response to Item 1, credit reporting agencies in Canada charge people a fee to get their credit score. So how many people will pay to see their score unless they are aware of a problem?

    In the US there is legislation pending that makes it mandatory for CBs to give consumers access to their credit score without a fee. If so many life decisions ( access to all credit vehicles, many life & property insurers base premiums on credit scores, even jobs) are dependent on credit scores why do Canadian consumers have to pay to access their credit score?

    Item #2 So the home-buyer has a commitment for a mortgage & and firmed up on the purchase of a property. How many mortgage agents/brokers, mortgage lenders, real estate agents say to that couple...you have legally bought a house, you have a mortgage commitment...From now until closing a) pay all your bills on time b) do not buy anything major on credit until after the closing c) do not change jobs, if you don't keep your score the same or better the lender may pull their commitment & not fund the mortgage.
    Based on my experience teaching real estate reps/brokers very few have that discussion.

    Lenders pull mortgage commitments for those very reasons every day.

    For mortgage agents/brokers & real estate reps, nobody gets paid if the deal doesn't close, wouldn't it be in your best interest to have that up-front discussion with your clients? Better still, CYA & put it in your disclosure document as well as have the discussion.
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  • JohnB 2014-06-03 12:12:13 PM
    Credit Bureaus will provide one free report in writing once per year, if you want it instantly then you pay.
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  • David O'Gorman 2014-06-03 12:23:55 PM
    But the free reports in Ontario do not contain a credit score. If you want a score, anytime, you pay for it.
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