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.

Why You Must Manage Your Credit

You will constantly hear about credit from me because it is absolutely critical to the mortgage process.  Stop for a moment and consider the impact your behaviour in managing your credit has on a lender’s decision about your level of qualification.

For instance, if you pay your debts on time, you are viewed as a responsible, trustworthy and organized individual.  If you don’t, then you are viewed as an irresponsible, untrustworthy, and risky individual.  When a lender looks at your credit score, they are deciding which type of person they might be dealing with.  Can you guess which type is preferred? 

Another key is how often you seek credit.  All of your credit history appears on your credit bureau and are called credit inquiries.  Seeking a lot of credit is worrisome to a lender because too many cards and/or loans makes a person look out of control.

Similar to the above is the balance on a credit card.  At the end of the payment period, the balance should be below 80% of the limit.  If not, you are seen as high risk.

Therefore, try to:

1. Have only one or two credit cards

2. Keep card balances under 80% of the limit

3. Make all payments on time 

Always take managing your credit seriously – your credit score is the make or break point between getting a mortgage, or not.