28 Dec

6 TIPS ON HOW TO REPAIR, INCREASE AND MAINTAIN YOUR CREDIT

General

Posted by: Diana Diamond

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.

28 Dec

Stop blindly signing your mortgage renewal! Here are the facts

General

Posted by: Diana Diamond

Well folks I just do not get it. I do not understand why smart person after smart person continues to sign on the dotted line for the first offer they are given upon mortgage renewal. Case in point that has brought this to a head for me was just a couple weeks ago. The mortgage was with one of the beloved big 5 banks whom we Canadians seem to hold in great awe and respect. Here is what it looked like:

Mortgage amount $259,997 in a new 5 year fixed rate term with a 20-year amortization at 4.10% making the monthly payment $1584.51 and the balance after 5 years $213,266.26.

I know for a fact that the SAME bank and many others were offering 2.59% for the exact same term. This is how that would have shaken out:

Mortgage amount with a rate of 2.59% in a 20-year amortization would have had a monthly payment of $1,387.40 and the balance at the end would have been $206,956.55.

That means that the client could have saved $197.11/month or $11,826.60 over the 5 years. On top of that is the crazy fact that they would have also owed $6,309.71 LESS at term maturity. $18,136.31 is the amount that this one person could have saved. That is one person out of a very large number of people doing the exact same thing so I must loudly repeat – Stop it!!

Let us examine the facts for a moment shall we?

1. Banks are a business and they are mandated to generate a profit for their shareholders and investors. Though success seems to have become a dirty word, this is actually a good thing for our economy. Our banks are strong and continue to report profits. A secret of the banking world that you need to be aware of is that the person you are sitting down with may receive a commission or a bonus based on how many mortgages they sign at the higher rates. I repeat that I do not have any problem with profit. I myself am commissioned based. What does concern me is the fact that the average consumer does not know this may be occurring on their transaction which may lead a them to make a choice without questioning their options.

2. The average consumer will shop 3 stores and visit many websites to save on big ticket purchase such as a TV or a car. Once they get to the dealership they will negotiate and play the game to get the best price so why do we not when it comes to our largest asset? Why are we not ensuring that we are not overspending $18,136.31?

3. There are a large number of lenders and banks in our country to choose from. They are solid institutions offering great mortgages to consumers. Research them and make an informed decision before dismissing them as unreliable. They too are watched over by the powers that be who work diligently to protect your rights as consumers.

4. There are so many well qualified mortgage professionals from Dominion Lending Centres who live and work in your community. Find one you like and have them find your best option if the whole thing seems like too much work.

Did you know that to switch your mortgage to a new lender at renewal, you will not incur a penalty, or pay legal fees or appraisal fees? It will probably take about 4 hours all together, which in the examples I used, works out to $4,534.08/hour. That is pretty substantial hourly wage and certainly worth your time.

So stop it and save your money.

Author: 

PAM PIKKERT

Dominion Lending Centres – Accredited Mortgage Professional
Pam is part of DLC Regional Mortgage Group based in Red Deer, AB.