Credit Saga

I believe I could blog almost every week about credit horror stories because they happen so frequently.  This week is no different.  I was recently asked by a bank employee to investigate if she could secure a mortgage.  She had been bankrupt a year ago and had a recent marital split.  Her bank employer would not approve her, even though she had worked for this bank for over 20 years. 

As a broker, I have lenders that will consider a situation like this. So, I took her application and drew a credit bureau.  Sure enough, she was three months from the end of the period where the bankruptcy shows on a credit bureau.  After a bankruptcy, a person must have perfect credit behaviour—that means no late payments, excessive use of credit or too many inquiries.  In her case none of this occurred, yet her rating was low.  After looking into it, we found out her ex-spouse had ordered a credit card and she was on his application.  She never knew about the card and he failed to make payments.   It was considered written off on her bureau too, which is why her score was so low. 

I thought initially I could easily help—now, it is going to involve hard work to get her over this hurdle and get her approved.

Avoiding Credit Horror

Avoiding Credit Horror

Sometimes it takes some effort to deal with your credit, good or bad, but the hard work pays off.  Time and time again I have met with clients who have excellent credit, and they cruise through the mortgage process with no difficulty; it is as easy for someone with good credit to buy a house as it is to buy an X-Box, coffee maker, or any other household product. 

When you have bad credit however, it’s a much different story. 

Here are a few tips to ensure great credit:

a) If you are paying bills using online banking, and your payment due date is a Saturday or Sunday, don’t pay on Friday.  The transaction won’t be processed until at least Monday—now it’s late and reflects poorly on your credit score.

b) Always keep your balance at 80% or lower than your credit limit(s).  So if your limit is $1000.00, your balance on the next bill should be $800.00 or less.

c) Two credit cards with a $1000.00 limit each are better than four credit cards with a $500.00 limit each.

d) If you ever go bankrupt and you have a government student loan, this debt will not be included in your liabilities.  Even if the bankruptcy trustee tries to include the student loan(s), you will be required to pay.  If you don’t make monthly payments, it will come back to haunt you!  Continue to make your monthly payments until student loans are paid off in full, no matter what.

e) Moreover, if you go bankrupt, make sure you are provided with a “Certificate of Discharge” showing the date your bankruptcy became official along with a “Statement of Affairs.”  The statement will list all included debts.  However, even if the statement lists a student loan, you must continue to make payments on the student loan.

Do you have a credit horror story?  More questions about bankruptcy?  Questions about qualifying, good and bad credit, or mortgages in general?   

Please leave a comment below! 

We would love to hear from you :) 

Bankruptcy: Rules of the Game

Like all issues related to good or bad credit, credit activity remains on your credit bureau for 6 years with Equifax, and 7 years with Trans Union Credit Bureau.  

I am frequently asked the question, “Can I get a mortgage having gone bankrupt?”  The answer is yes, providing the following criteria are met.

Insurers like Canada Housing and Mortgage Corporation (CMHC) and G.E. require that you can qualify for a mortgage after completing a minimum of 2 years time following your discharge date.  Check your Certificate of Discharge papers for your date.  Also, you must have re-established credit.  This is not a car loan that you had before/during your bankruptcy.  “Re-established” means new credit.

Below are a couple of recommendations:

1. The longer you wait after the 2 year period, the better your chances of qualifying.

2. Having re-established credit with a Capital One secured credit card (or Home Trust Visa, etc.) with a $500.00 limit won’t cut it.  If you are able to get a secured credit card, try every 6 months to increase the limit, up to to $1000.00 or even $2000.00.  Just don’t use it too much and be sure to never have a late payment.

2. If you ever have a late payment while your bankruptcy information remains on the credit bureau, you are out of luck.

Next time I will discuss a few bankruptcy “horror stories” so you can avoid them in the future.  For more information on bankruptcy in Ontario, please click here.

Credit "Horror Stories"

...And how to avoid them!

Being in the mortgage business for over 14 years, I have encountered many credit “horror stories.”  I would like to share a few different situations that you may be experiencing, or can watch out for to avoid repeating these mistakes:

A) If you decide to claim bankruptcy, student loans are not considered a “forgivable” debt.  Do not stop paying or you will find getting a mortgage will be nearly impossible for a considerable period of time.  (Also, watch out for a blog entry in following weeks all about bankruptcy).

B) Even one single late payment on a credit card damages your chances of being able to purchase a home for up to a year thereafter.

C) Do not make payments to credit cards online too close to the due date.  Allow time for the payment to be received and posted (3 business days at least, weekends don’t count).

D) Typically, VISA and MasterCard are more “forgiving” when it comes to late payments.  Be wary with cards like Sears, CTC, HBC, gas station cards (Esso), etc, because if you are even one minute late from the due date, these credit companies will often record and penalize you, lowering your credit score.\

Overall, keep paying student loans, make credit payments in advance to due dates, and watch out for less mainstream credit cards and their policies regarding lateness and penalty.  If you have more questions, or would like any advice or more information about your specific “horror story,” please e-mail me at slaney81@gmail.com or call 519-426-9842.

[Cartoon from http://misstrade.files.wordpress.com/2007/08/englehart.jpg]

Happy Halloween!

-- Thanks to political cartoonist and Editorial Cartoonist for The Columbus Dispatch, Jeff Stahler, for this appropriate cartoon --