You’re at the desk applying for your first mortgage, and you’ve consistently brought soggy, homemade sandwiches to your desk to get that down payment. You’ve done everything by the book; paying off your monthly credit card statement, only took out loans you knew you could payback and generally have kept your credit score in tip-top shape. So why is this mortgage advisor telling you that your application has not been successful?
You may think this article is going to be a frivolous entertainment listicle or pseudo-financial article. However, if you manage to avoid these pitfalls, you will enjoy lower interest rates, higher credit limit and will be more likely to be approved for loans in the future. Read on if you’re looking to improve your credit score for that all-important mortgage application or simply interested in getting more familiar with the intrinsics of how your credit score.
Overdue Library Books
So not only does returning that novel increase your standing as a Canadian citizen, but you’re also helping yourself get your loan application improved.
Missing Child Support Payments
This one really has a severe impact on your credit score. It differs from others on this list as it is reported directly to the collection agency after a single late payment. Worse still, it stays on your credit score for seven years.
Unpaid parking tickets
Under the credit bureau section of your credit report, you may be surprised to find that you are indebted to a particular city. Many will scratch their heads thinking back to how this occurred and the answer is quite frequently unpaid parking tickets. Don’t be too angry at your former unenlightened self; I’d recommend ringing up the city’s council to get the information you need to pay off that niggling fine. You can then contact the collection agency to wipe the entry from your credit report.
Another example to keep in mind are highway tolls, there are easy to forget about but if left for long enough can have a pretty significant effect on your credit rating. If you have a niggling feeling that, say, the Highway 407 could be waiting for a payment from you, give them a ring and settle the payment. It’s better to be safe than have your credit score suffer!
Make sure you deal with all of your parking ticket issues before heading to the bank for an application. The last thing you want is for your credit rating taking another hit for requesting too many credit reports.
Cosigning a credit card or loan
I don’t care if she’s your darling wife or he’s your best friend from childhood, and you want to get into business together. Steer clear of getting a joint credit product of any kind if the other half of the co-signature spends like there’s no tomorrow and is always on the late side of paying off their credit card statement. There is a danger that they could adversely affect your credit loan. A lot of the surprising facts on this list are reversible. For example, a library book that you forgot about is forgivable and doesn’t take too much to rectify. On the other hand, you may spend a long time unknowingly decreasing your credit score for signing one single document.
For many people, this is a necessary evil. Rent in places like Vancouver is extortionate and you may be forced to switch up your rental situation to be able to afford your monthly rent. Also, the millennial lifestyle means that many people are working from home which can lend itself to quite a nomadic lifestyle.
So how exactly can this impact negatively on your credit score? It all comes down to your utility companies and corporate landlords. Both of these will file to a collection agency if repeated late payments occur. Furthermore, the rental deposit disputes and lingering bills at the end of a tenancy agreement are crucial to sort out if possible. Again, these are easy things to forget about, but nobody wants the collection agency breathing down their neck.
Your credit score does not follow you in your gap year across the globe. So while your Canadian credit rating sinks due to lack of activity, your credit score is non-existent when arriving into a new country. If you decide to work abroad you may find it hard to take out a loan because of the differing reporting agency.
Unpaid medical bills
Your failure to pay doctors bills will only arise on your credit report if it is a common occurrence. At that stage, the collection agency will be asked to intervene, so a single late payment is not going to plummet your score.
This article is a useful reference for a lot of credit users. Most people know the basics; that maxing-out on credit cards and filing for bankruptcy are going to create severe problems for your credit rating. However, these tips and tricks are helpful as they will separate you from other lending applicants.
Many of you reading this might be wondering, or even worrying, how much does your credit score drop from these penalties. And it’s not clear-cut at all. First off, when people talk about their credit score, they’re often referring to the FICO system which is a company that formulates your credit score. Banks and other institutions may not necessarily use this one, but it is the best-known method out there. It goes without saying that different companies produce different scores for the same credit report.
On top of that, each system changes when updated. Another factor is that late mortgage payments affect those with a lower credit score more than those nearer to the 700 mark. Even though it’s a complicated system, it’s best not to shy away from the technicalities and just do the best that you can.
This information is just our view and should be not be considered advice of any sorts.
From our experience and other professionals we partner and engage with, we work to find useful tips and information that would be important to share.
If you are someone that is looking for professional advice tailored to your circumstance, please contact a bank, financial advisor, or mortgage broker.