Road reps badmouth broker credit checks

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It’s one of the clear advantages brokers offer clients hunting for a mortgage, but even that is being threatened by mortgage specialists arguing the hit attached to their credit checks are much lower than those undertaken by brokers.

“It’s totally false,” says Ron Butler of Butler Mortgage. “We hear this constantly – the bankers are trained to say it.”

Butler is referring to the claim by mortgage specialists that they are able to perform credit checks that result in just a two-point hit to a client’s credit score as opposed to the eight-point penalty they claim is attached to a broker query.

It’s a boast that Butler and others argue as just another way for banks to attract and keep mortgage clients.
But there is a remedy to that type of fear mongering that keeps clients locked into bank mortgages: education.

John Panagakos, a principal broker with Dominion Lending Centres, says he informs clients that multiple checks in a short period of time will have just a small impact on score.

“If a client is shopping around for a mortgage, the credit bureau has built in a model that (allows for) multiple hits and it won’t drastically affect your credit score,” he says.

Even still, that one-time hit is often negligible against the credit score. And, as Butler explains to his clients, there are bigger threats to credit score than pulling up a report.

“What the consumer really needs to understand is the things that affect their credit is maxing out lines of credit or credit cards, rather than a couple of credit pulls,” Butler says. “Leaving your line of credit maxed out, month in and month out, is massively more impactful than a couple of credit pulls.”

Patrick Smith, a mortgage broker with Dominion Lending Centres, contends that the two-point cost of a credit check at the bank – however false – certainly removes that particular advantage from brokers’ arsenals, but he believes the impact to his business would be minimal.

“When you throw away eight points versus two points, (brokers are still) saving the clients the leg work of looking around and being well-versed in what terms are favourable and the things that banks aren’t necessarily disclosing,” he says.
  • MaryAnn on 2015-06-15 10:59:54 AM

    I recently had a file go south when my client went over limit and past due on $1,000
    Visa while we were waiting for the new construction to be completed and for their house
    to sell.

    The house did not sell and the house was completed. Normally we never go back on the bureau but as we approached possession we noticed that the two standing approvals were all back checked by each lender through the course of the 120 day rate hold. When the deal was collapsing because the over limit and pass due dropped the score significantly, we were trying to hold the existing property by virtue of a revenue and changing the down payment every bank plus both CMHC & Genworth searched both bureaus. I complained to Equifax because our consent doesn’t provide for the FI to pull behind us in absence of a commitment being signed by the debtor.

    I also contacted D & H because in the old days when it was Morty, there was an agreement that the lender would not pull after us. Each lender wanted to know what the other lender was doing and it affects no matter what anyone says and looks equally poor.

  • Mike on 2015-06-15 11:02:54 AM

    To clarify Equifax counts all mortgage inquires in one month as one inquiry. It has been this way for years. Realistically alot of lender pull their own credit file when we send in the application so using a broker can result in more hits. Good credit can withstand a inquiries s it makes up a very small portion of the over all score. Perhaps when you run an article like this you might interview Equifax and get the real facts instead of a lot of he said, she said.

  • MaryAnn on 2015-06-15 11:13:31 AM

    Get you head out the sand. I have my facts thank you very much.

  • George Christopoulos on 2015-06-15 11:31:45 AM

    If anyone is losing a deal due to a 2 point credit they should leave the business

  • Omer Quenneville on 2015-06-15 12:44:34 PM

    The big banks have effectively become the MacDonald's of mortgage lending. Its not the burger that matters it is what is secretly contained in the burger that you have to watch out for. The problem with the mortgage brokerage business is we are not well organized as a force to deal with it. We can and do provide a better service, we just don't communicate it well on a large scale.

  • eCreditFix . ca on 2015-06-15 1:13:21 PM

    There is no difference in point loss between a major bank and another lender. Also to clarify, it is 14 days that you have for Equifax (not TransUnion) that multiple credit inquiries will count as one but only for mortgage financing and car loans. If your client is worried about a few point drop then there is probably much bigger issues that the need help with. All I do is fix credit and help people improve their credit scores - look me up if you have more questions.

  • John Bargis on 2015-06-15 9:07:52 PM

    Borrowers should be very suspect and cautious with Bankers/road reps who choose to use non-factual information to sell them on their bank's products.

    Employing fear tactics to sell product is unethical, and borrowers should be very concerned about what the bank road reps aren't telling them about the onerous products they offer, which includes the huge penalties that go along with them, not to mention the other surprises borrowers typically experience with lack of full disclosure by bank reps.

  • Mortgage Delivery Guy on 2015-06-16 10:43:23 AM

    All one can do is to educate clients well so that they can make their own decisions.
    Infact addressing the borderline credit score of a client could also help alleviate the credit matter to begin with.

  • broker on 2015-06-16 3:34:14 PM

    Interesting that TD and National Bank will run a client's credit score every month is a client has a HELOC yet they claim brokers cause an issue. Grow up bank reps!!!! And keep working for 40bps while we make 120.

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