30 May

WILL CHINESE CAPITAL CONTINUE TO POUR INTO CANADIAN REAL ESTATE?

General

Posted by: Anne Martin

WILL CHINESE CAPITAL CONTINUE TO POUR INTO CANADIAN REAL ESTATE?

Will Chinese Capital Continue to Pour Into Canadian Real Estate?

Why Are People Taking So Much Money Out of China?

China is experiencing the largest episode of capital flight in history, encouraged by the slowdown in economic activity, the plunge in the stock market and the surprise devaluation of the currency–the Chinese yuan (also called the renminbi) last August. Chinese businesses and consumers are moving money abroad where its value might hold up. Last year, some $700 billion to $1 trillion (U.S.) is estimated to have fled China (see chart below). The dream of many Chinese to have their children educated overseas is another cause of long-term capital outflows. Finally, the flows are driven by a belief that it will only get harder to move money offshore.

Capital controls already exist. Individuals are limited to the equivalent of $50,000 a year, though there are multiple ways to get around the restrictions. The Chinese government is ramping up efforts to stem the flood of money with new rules making it harder for foreign companies in China to repatriate earnings and for investors to move yuan overseas.

In recent days, the yuan has come under renewed downward pressure with mounting expectation of Fed rate hike. The biggest problem for China so far is perception. Capital flight signals a loss of confidence in the government’s ability to run the economy. The perception is made worse in China by the government’s opacity and by the economy’s difficult transition from reliance on big infrastructure and exports to consumer spending.

Much of that Chinese money is moving into housing, not only in Toronto and Vancouver, but also into real estate in Australia, New Zealand and the United States. The Chinese are now the number-one foreign purchaser of U.S. residential real estate–surpassing Canadian inflows this year. This is stimulating the housing markets, especially in New York, Los Angeles, San Francisco and Seattle. Chicago, Miami and Las Vegas are also seeing significant investment.

House prices in Vancouver have surged exponentially with the rising outflow of Chinese capital looking for a home. To a lesser degree, the same is true in Toronto, blowing up a bubble in already overheated housing markets. Can this continue?  No one knows, but there are varying opinions whether this is a sustainable force for price appreciation or will China’s efforts to crack down on capital outflow be successful, removing one of the linchpins of the Vancouver and Toronto housing markets.

The answer to that question is not simple. Some believe the Chinese money ball will only grow, bouncing its way around the world. Many believe that China doesn’t need to stop the capital outflow, but just to contain it. Historically, governments cannot effectively control capital outflow. However, everything about China breaks historical norms, and the government is working hard to make foreign exchange transactions more difficult. This poses a significant downside risk to Canada’s strongest housing markets.

In another example, the capital outflow from Russia has been proportionately much larger and some of that capital has also found its way into Toronto housing.

Can The Vancouver and Toronto Housing Boom Last? 

The media continue to put the spotlight on the Vancouver and Toronto housing booms and the role played by foreigners to drive up prices. Affordability issues are of great concern and questions continue to arise regarding the sustainability of the housing bubble. Not only are many first-time homebuyers shut out of the housing market, but the supply of listings is held down by the affordability issue as well. Many existing homeowners cannot afford to move up as foreign capital has mainly boosted the luxury housing market. Reportedly, the foreign buyer is far less price sensitive than Canadians, boosting the priced of multi-million dollar homes.

The Canadian government and regulatory response to this foreign inflow of money is evolving. The media have recently highlighted the potential for money laundering and the lax enforcement of  anti-money laundering initiatives in the real estate sector. But it appears that most of the Chinese purchase of Canadian housing is not for money laundering purposes, meaning garnered through illegal activity or to support terrorism. Moreover, Canadian real estate players are not responsible for enforcing Chinese law. According to a spokesman for the Financial Crimes Enforcement Network, an agency of the U.S. Treasury Department, banks are required to “conduct enhanced due diligence on foreign correspondent accounts.”

Meanwhile, Chinese officials have intensified a crackdown on what are known in China as underground banks, which Chinese nationals often use to shift money in and out of the country. Those money-transfer agents, however, remain rampant despite repeated enforcement efforts, according to the state-controlled Xinhua News Agency. While determined individuals can always find a way to move money, including untraceable bitcoin transactions, a slowdown in the volume of Chinese capital moving into Canadian housing is a meaningful risk factor for the hottest markets in Canada.

Will Chinese Capital Continue to Pour Into Canadian Real Estate?

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

 

27 May

9 TIPS TO IMPROVE YOUR CREDIT SCORE

General

Posted by: Anne Martin

9 TIPS TO IMPROVE YOUR CREDIT SCORE

9 Tips To Improve Your Credit Score

An important rule of thumb to remember regarding credit is that YOU are your only advocate for your credit. YOU are the only one that can improve your credit. YOU are the only one that can manage any errors on your credit. YOU are the only one who can determine who pulls and when your credit is looked at.

Frequently, when we move forward with a client’s application for mortgage preapproval, there are errors on the individual’s credit report (some statistics say 80%). It is a MUST that those errors are corrected immediately. Calling the credit bureau company to get those errors corrected are the responsibility of the consumer. The credit bureau company will assist you to correct those errors by providing needed information such as telephone numbers, account numbers, etc to the consumer who is questioning their report. This goes a long way in improving credit. If there are errors, they WILL negatively affect your credit score.

Improve your credit score by….

1. Paying your bills on time. Even if it is a minimum payment amount, paying bills on time is probably the most important aspect of keeping your credit healthy. A late payment ALWAYS significantly lowers your credit score.

2. Try to keep your credit card balances within 30% of the maximum allowable credit. Banks always consider the amount of debt you have. If you can’t manage your credit card debt, the bank will doubt that you can manage mortgage debt.

3. Don’t apply for credit on a frequent basis. Some stores market their credit card applications every time you go through the cashier’s check out. Keep in mind that marketing is a big part of credit and the high interest rates that you will pay on remaining balances will be far more negative than the 3% cashback that is being offered.

4. Don’t close old credit accounts. Keep the older credit around. The lender will always look to see how old and established your credit is. The older, the better.

5. Don’t pull your credit too often. Although credit pulls for mortgages, automobiles, and student loans is looked at differently than credit cards, it is important to keep credit pulls to a minimum. The more applications to credit cards, the lower your credit bureau score goes.

6. If you are going to make a purchase that will require more credit, it is better to call the credit card company and increase your credit limit than make a purchase that goes over your credit limit. If you go over your credit limit, this will significantly affect your credit score to the negative.

7. If you enter into a dispute with a company, it is better to make a payment and close the account than close the account forcing the company to go to collections. Be very careful when online shopping as it is very difficult to reconcile a dispute when there is little physical presence. Make sure you know who you are shopping from when making purchases online.

8. Don’t buy too much on credit at one time. If you go out and buy a car, buy a cellphone and then apply for a personal loan, the credit bureau sees this as financial instability and your score will be lowered. Even getting a preapproval from a bank will lower your score.

9. Make sure your credit bureau has no mistakes or continuing collections. When you call in to make sure your credit score is accurate and something comes up such as collections for a cable company, make sure to get the contact information from the credit bureau company and call the collections to settle the payment as soon as possible. As well, get the collections company to call the credit bureau to mark the account as “paid” and even remove the notification entirely.

Geoff Lee

GEOFF LEE

Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.

 

26 May

Bank of Canada stands Pat Once Again, no change to overnight rate.

General

Posted by: Anne Martin

Bank of Canada Stands Pat Once Again

Mortgage Broker Barrie 
 
In a short but not-so-sweet missive, the Bank of Canada left its target overnight rate unchanged at 1/2 percent as expected. The Bank, however, sharply reduced its forecast for second quarter Canadian growth owing to the devastating wildfires in Alberta. The Bank’s economists estimate that the fire-related damage and shutdown of oil production will reduce the current quarter’s inflation-adjusted GDP growth by 1-1/4 percentage points, likely taking growth down to negative territory. I expect growth to decline by -1.0% in the second quarter with a substantial bounce back in Q3 as recovery and reconstruction commence. 

The Canadian economy started the year with surprising strength, but business investment and intentions were disappointingly weak. Although oil prices have edged upward on supply disruptions to near $50 a barrel for West Texas Intermediate, the Canadian economy’s adjustment to the mid-2014 oil price plunge remains slow and uneven.

Core inflation continues to be near the 2.0% target as the past decline in the Canadian dollar puts upward pressure on imported products, which has been largely offset by the deflationary effect of excess capacity. Hence, the Bank sees no reason to change the target overnight rate at this time.

The central bank also highlighted the risks associated with accommodative financial conditions, as housing markets continue to boom in Vancouver and Toronto. In rather opaque Bank-speak, the comment was that “household vulnerabilities have moved higher.” Clearly, the Bank is concerned about the debt burden of  home buyers. Recent surveys have suggested that more than one-third of home buyers are finding their debt burdens onerous and many have missed at least one mortgage payment in the past year. The Bank of Canada has been whistling this tune for years now, but the continued frenzy in the hottest housing markets have further accentuated concern.

Can The Vancouver and Toronto Housing Boom Last? 

The media continue to put the spotlight on the Vancouver and Toronto housing booms and the role played by foreigners to drive up prices. Affordability issues are of great concern and questions continue to arise regarding the sustainability of the housing bubble.

I am currently researched the viability of continued housing demand by the Chinese given the government’s 2015 introduction of capital controls, which limits capital withdrawal to the equivalent of $50,000 (U.S. currency) per person. I will detail my findings in another report, but suffice it to say China’s capital outflow has surged in recent months, notwithstanding these controls. There are a number of ways to circumvent the rules and the penalties are tiny. The Chinese government is simply not enforcing the controls and the continued devaluation of the Chinese yuan continues to trigger massive outflows (see Chart below). Much of that money is moving to housing in Toronto and Vancouver, as well as to Australia, New Zealand and the United States. The Chinese are now the number-one foreign purchaser  of U.S. residential real estate–surpassing Canadian inflows this year–. This is stimulating the housing markets especially in New York, Los Angeles, San Francisco and Seattle. Chicago, Miami and Las Vegas are also seeing significant investment. 

The Canadian government and regulatory response to this foreign inflow of money is evolving. The media have recently highlighted the potential for money laundering and the lax enforcement of of anti-money laundering initiatives in the real estate sector. But it appears that most of the Chinese purchase of Canadian housing is not for money laundering purposes, meaning garnered through illegal activity or to support terrorism

More on this to come.

 
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca
18 May

INCREASING HOME VALUES ALLOW FOR REFINANCE POTENTIAL

General

Posted by: Anne Martin

INCREASING HOME VALUES ALLOW FOR REFINANCE POTENTIAL

Increasing Home Values Allow for Refinance Potential in Vancouver!

Just a few years ago, a federally imposed limit on how much equity you could access via refinancing your home was tightened to 80% of value. The requirement to maintain a minimum 20% equity in your property has made refinancing for many people difficult. Those who only put 5% or 10% down must wait years to build up to the 20% minimum as it is.

Over the last two years, I have seen many clients with more than 20% home equity yet carrying higher consumer debt load seek a refinance to access equity, pay off or consolidate all of their consumer debt. Many clients just did not have enough equity to make this possible.

Fast forward to spring 2016 and we are seeing a sellers’ market leading to bidding wars and increased home valuations. This recent surge may be of benefit to similar existing homeowners that do not wish to sell.

A refinance does not make what we owe disappear. We are looking to move debt from bad (unsecured) debt to good debt where it is secured against an appreciating asset. We are looking to wipe the slate clean and get a fresh start! Having high usage of your credit limits is likely eroding your credit score, adding needless stress to your life and costing you more over time than is necessary.

The major benefits of a refinance are roping all expenses into one low interest debt, reducing your overall monthly interest cost yet most important for families is the monthly cash flow improvement! I often recommend that some of the monthly savings be added to the mortgage prepayments to accelerate the debt reduction while keeping some cash left in pocket for lifestyle enjoyment!

Many people with fantastic jobs and incomes simply get a bit too deep into multiple lines of credit, new car payments and credit cards. It happens all too quickly where people overestimate what they can comfortably afford. The focus of debt cost unfortunately has shifted where folks are not concerned about the total debt amount or payoff schedule, the determining factor seems to have evolved to whether they can handle the monthly payment; cars, toys, vacations all start to add up.

These groups of clients had been able to make all payments, yet the debt did not seem to be reducing year over year. Their options were second mortgages, private mortgages or refinance to the 80% max and still keep a pile of monthly consumer debt repayments. Ultimately, I had recommended that a few clients opt to sell their home to pay off the entire debt load, and put 5-10% down on a newer home. This was the only way to access more of their equity to pay everything off. The average monthly savings that I have seen for these groups of clients was between $1,000 – $1,600/month!

This is a prime time to reassess your current financial situation. If you owe significant amounts on credit cards, lines of credit or other consumer debts, there may be enough headroom in your equity to allow you to refinance. Another prime reason to consider a refi would be property improvements and renovations, where you may be accessing equity yet the added debt may be directly offset by the potential increase in property value.

Ultimately, it is best to consult with a Dominion Lending Centres mortgage professional first. Let the math and numbers show you whether it makes sense to make a change. Our job is not to sell you a mortgage. We offer solutions or strategies through showing the numbers in a way that may have not occurred to you before!

Written by

KRIS GRASTY

Dominion Lending Centres – Accredited Mortgage Professional
Kris is part of DLC Canadian Mortgage Experts based in Surrey, BC.

16 May

WHY A BIG DOWN PAYMENT IS BETTER

General

Posted by: Anne Martin

WHY A BIG DOWN PAYMENT IS BETTER

Why a Big Down Payment is BetterFirst time home buyers look to their families, the media and the Internet for all their information on how to buy a home. As a result, they know that they need 5% of the total home purchase price to buy the home of their dreams. While this is true, there are a few things that family may not tell you or they may not be aware of.

Putting down as much as you can afford is a great idea. We have all heard that mortgage rules are tightening, the economy in Alberta is down and lenders are being a lot more selective in who they give mortgages to. What you may not have heard is that the mortgage insurers – CMHC, Genworth Financial and Canada Guaranty – are also looking at lenders more carefully before approving mortgage default insurance. They are looking closely at employment, credit and how likely you are to stop paying your mortgage. While 5% is the minimum, if you have a few late payments from your college days or a collection from a cellphone company on your credit report, they will think twice about giving you an approval. However, if you put 10% down they will look at your differently. Putting twice the minimum down payment shows commitment. It shows that you have “skin in the game” and are less likely to default on your mortgage. If they are reluctant to approve your mortgage, a higher down payment can sway their decision.

The second advantage of a larger down payment is lower monthly payments. Let’s face it, when you get into a home, your paid off car will eventually need to be replaced and you will now have car payments and repairs chipping away at your monthly income. If you are newly married, child care expenses, baby furniture and starting an RESP will come up. You may be able to afford higher monthly payments, but you will be better off down the road if you have lower payments.

The third advantage is a lower CMHC premium rate. The bigger your down payment, the lower the risk to the mortgage insurer and the rate that they charge you. With 5% down you must pay 3.60% on the mortgage balance. On a home purchase of $350,000 this comes out to a premium of $11,970.

10% down results in a lower premium of $7560 and if you can make a 20% down payment you can avoid mortgage default insurance and pay $0.

Why a Big Down Payment is Better

Finally, the bigger your down payment the smaller your mortgage balance is to start. As a result you will save lots of money over the term of your mortgage.

A 5% down payment will result in a payment over 25 years of $115,381 of interest. 10% down lowers this to $108,042 and 20% down lowers this to $93,786.

In other words, if you can come up with a 20% down payment you will save over $21,000 in interest over the term of your mortgage. This is based on today’s historically low interest rates. I’m sure that sometime over the next 25 years rates will go up to the 5.79% that people were paying 6 years ago and they could go higher.

In conclusion, if you have a chance to put more money down on the purchase of your new home, you should consider it. You can save BIG TIME money by doing so. If you need more advice, contact your local Dominion Lending Centres office.

 

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Westcor based in Calgary, AB.

12 May

HOW TO PAY OFF DEBT FASTER

General

Posted by: Anne Martin

HOW TO PAY OFF DEBT FASTER – 25 SECRET TIPS YOUR BANKER DOESN’T WANT YOU TO KNOW

How To Pay Off Debt Faster - 25 Secret Tips Your Banker Doesn't Want You To Know

1. Make a double mortgage payment whenever you can. Doing this once a year can shave over 4 years off the mortgage! Sometimes you can skip a payment later on too…if you really, really need to. Try not to. If your payment is $2,000 a month, four years of no payments is $96,000!!

2. Increase frequency of payment. For Example going from monthly to bi-weekly accelerated can shave over three years off your mortgage! $2,000, three years of no payments is $72,000!!

3. Increase your payment. For example a one-time 10% increase can shave 4 years off the mortgage. That’s $96,000! Imagine if you bumped the payment 10% every year from the get go!!! You would be mortgage free in 13 years! Start to finish! Can’t do it? How about 5% every year….you would be mortgage free in 18 years! How about increasing the payment by the amount of your annual raise?

4. Lump sum payments…same idea…mortgage is gone way faster! Even just one payment a year equivalent to 1 monthly payment will give you similar results as #2 above! How about using your annual work bonus?

5. Renegotiate whenever rates drop to save interest and pay mortgage faster! Generally a good idea however *Caution* get independent professional advice (a cost benefit analysis) to make sure it makes sense for you at that time. I can help. A 1% reduction on a $300,000 mortgage will save $250 a month…times 5 years…that’s $15,000!!

6. Keep your credit rating high for best rate. Always pay on time. Never let payments slip past their due date. Always keep balances low in relation to credit limits on credit cards, lines of credit, etc. 50% or less is best even if you pay the balances in full every month. What generally reports to the credit bureau is the statement balance each month. So if your credit limit is $3000 and you are running $3000 a month through the card each month (to collect all those points you never spend or can’t use in blackout periods) and paying in full, it will look like you are maxing out your credit limit and your credit score will drop accordingly.

7. Increase your mortgage! Yeah I know sounds backwards! Do it to roll in your credit cards, line of credit, car loan etc for a better rate and a set payment plan. Oh you say you don’t want to extend the repayment period of that stuff by rolling it into your mortgage or you have a low or promo rate credit card (those never end well) I agree! Then keep the total payment amount the same but pay it in one neat monthly payment to the increased mortgage.

8. Make an RRSP contribution and use the refund to pay down your mortgage.

9. Go variable rate with your mortgage but keep payments as if fixed rate. Variable rates usually win out over fixed rates. By paying a higher payment you will pay off the mortgage faster. It’s also a buffer in case the rate rises above the fixed rate for short periods of time. *Caution* variable rates are not for everyone. Get independent professional advice to find out what is best for you. I can help!

10. Take your mortgage with you when you change properties to avoid penalty or higher rate on a new mortgage. This is called “porting”. Make sure that your mortgage has this feature. It is not widely known and could save you a ton of dough.

11. Set up auto savings every paycheque, even $10, when it reaches the amount of one mortgage payment, apply it to the mortgage. This concept goes nicely with #4 above.

12. Unhook from the money drip…stop paying with your fancy points credit or debit card. Way too easy to overspend! Go old school, go off the grid…PAY CASH, it works!

13. Don’t ever buy on layaway, you know, six months don’t pay schemes. You think…No problem I’ll just pay it in six months, it will be okay. Yeah right!

14. Downsize your house. Two good friends and clients of mine, having followed many of the tips here, are in great shape except they have a six bedroom house! Two people, six bed house – go figure! They are nearly debt free so no biggy, but can you say the same? Circumstances change, make the adjustments along the way!

15. Don’t want to move? Convert the basement/rooms to rental and use the income to pay down debt.

16. Convert your mortgage to tax deductible. If you are self-employed, own rental property or have investments, this is likely possible. I won’t go into details here, just ask me how.

17. Have a payment priority.

18. Pay off the highest interest rate first.

19. If you have tax deductible loans, pay them off last, slowest. Pay the non-tax deductible loans first and fastest.

20. Pay off ugly debt first. Stuff like credit card purchases.

21. Payoff bad debt next. Stuff like car loans, boat loans. Things that depreciate in value.

22. Pay off good debt (or shall I say “not so bad debt”) last. Stuff like mortgages, investment loans. Things that hopefully appreciate in value.

23. Buying a car? Finance it if you have to, don’t lease! *Exception* If you are self-employed it might make sense.

24. You have $20,000 in a secret bank account for a rainy day fund and $20,000 owing on a line of credit. Seriously? The bank account is paying you next to nothing (which is taxable income to boot) and the line of credit rate is way higher (and not tax deductible). You know what to do. You can keep the line of credit open and on standby for rainy day funds. Make it the secret line of credit that you have but never use.

25. Give your Banker more money. No really. Keep enough in your chequing account to meet the minimum requirement to waive your service charges. My bank charges $10 a month for 25 transactions and nothing, zero, zilch, zip if I keep $2,500 in the account. Let’s see $10 x 12 is $120 a year to pay off debt. I’d have to earn 5% with the $2,500 in my savings account to come out ahead. No brainer here. Oh yeah, if you need more than 25 transactions a month…see #12 above.

26. #26? BONUS TIP and MOST IMPORTANT. Let’s face it, you’re not the Government and you’re not a Bank, you can’t run deficits forever and you won’t get a bailout….stop procrastinating already! See 1 through 24 above and take action now!

Sidenote: *Caution* beware of some too good to be true ultra-low rate mortgages. These “no frills” mortgages are often loaded with restrictions like pre-payment limitations, fully-closed terms, stripped-out features, or unusual penalties. You really need to compare product to product. If you’re not looking at what you’re giving up, you may regret it in the future. This alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!

Written by:

LEN ANDERSON

Dominion Lending Centres – Accredited Mortgage Professional
Len is part of DLC Origin based in Vancouver, BC.

10 May

Think about your options before signing the renewal offer. Mortgage Market Update May 10, 2016

General

Posted by: Anne Martin



 


Anne Martin
Mortgage Agent | FSCO # M10002257

705-791-6683
1-800-500-1841 
 
anne@ndlc.ca | www.barriemortgagelocators.com

39 Collier Street, Ste 300 Barrie ON L4M 1G5

  

  Neighbourhood Dominion Lending Centres |  FSCO 11764  Independently Owned & Operated

Tuesday, May 10, 2016
Market Update

Bonds continue to stay unpredictable, moving back down the past few days, no changes in rates from last week.

5 year fixed rate mortgage are still in the 2.44-2.64% range depending on the closing dates and if high ratio or not. 

Variable rates remain in the 2.25-2.4% range.

Here is a link to a bond site for those who want to follow bond yield more closely, this is the site we rely on for our information.

http://www.investing.com/rates-bonds/canada-5-year-bond-yield-streaming-chart

 
P.S. If you, your family, or co-workers require guidance on current market trends, please call me, I am always available to help.

…Anne

 

Before you sign that mortgage renewal offer, think carefully about your options

Financial Post
Garry Marr | May 1, 2016

There’s a one-in-four chance that, if you’re among the 5.7 million Canadian households with a mortgage, you’re going to receive a letter in the mail this year telling you it’s time to renew.

TD Bank Financial Group said the number of renewals each year has climbed to 25 per cent as homeowners have switched to shorter terms …Read More…


CONGRATULATIONS !
to the 2015 Grand Prize Winners of our $25,000 Cash Giveaway Contest 

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To enter, close a mortgage through Neighbourhood Dominion Lending Centres (including switches and refinancing) OR refer others to do the same. For each deal that closes, you and your referral will receive an entry ballot! The more referrals you send, the better your chances of winning!

Call me for more details.


 Historical Interest Rate Graphs   

Below you will find a feature which will give you current interest rate trends. It  can also be accessed on our web site. I hope you and your clients find it useful

Click here to  access rate graphs 


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6 May

5 COMMON MYTHS ABOUT CREDIT SCORES

General

Posted by: Anne Martin

6 MAY 2016

5 COMMON MYTHS ABOUT CREDIT SCORES

5 Common Myths About Credit Scores

Because the top secret formula has never been released there are common myths that are floating around about the ones credit score, here are the top 5.

1. TOO MANY CREDIT CARDS WILL HURT MY CREDIT SCORE

Actually, cancelling healthy active cards or accounts hurts more as all of the payment history is lost along with the type of credit granted. The average Canadian has 10 credit sources, having more does not hurt as long as you pay on-time. Along with paying on-time you should observe the rule of maintaining a balance at no more than 75% of the limit, but less is best. Applying for new credit every week will lower your score more.

2. USING CREDIT TO BUILD A CREDIT SCORE

Remember to keep your balances low and manageable. The credit bureau only receives reports regarding your balances and payments. Making your payments on-time builds your credit history strength and score.

3. MY UTILITIES AND INTERNET ARE PAID ON-TIME EVERY MONTH

These providers only check your credit to determine creditworthiness. They don’t report your payment history to the bureau. On the flipside, they only report when you DON’T pay. The other organizations that only report upon default are municipalities and ICBC. Pay your traffic tickets and bylaw infractions.

4. CHECKING MY SCORE WILL DECREASE IT

There are two types of inquiries, soft and hard. A soft inquiry occurs when you pull your own credit report. Credit card companies also pull soft inquiries when marketing pre-approval offers. A hard inquiry happens when submitting a loan or credit card application. A hard inquiry is one that is triggered by the applicant. Soft inquires do not affect the credit score. A consumer can pull their own credit score as many times as they wish without repercussions. Hard inquires affect the score slightly. These inquires are included in the calculation done for credit scoring. Recording the number of inquires a consumer has on the credit report allows potential lenders to see how often a consumer has applied for new credit. This can be a precursor to someone facing credit difficulty.

Too many inquiries could mean that a consumer is deeply in debt and is looking for loans or new credit cards to bail themselves out. Another reason for recording inquires is identity theft. Hard inquires not made by you could possibly be an identity thief opening accounts in your name. Inquires are required to remain on the credit report for at least a year. Hard inquires remain on the report for two years. Soft inquires only appear on the report that you request from the credit bureaus and will not be visible to potential creditors. Hard inquires appear on all credit reports. All inquires disappear from the report after two years. Only individuals with a specific business purpose can check your score. Creditors, lenders, employers and landlords are some examples of approved business people. The inquiry only appears on the credit report that was checked.

5. THERE IS NOTHING I CAN DO ONCE A PAYMENT IS LATE

Creditors are always willing to work with you if there is a late payment. If notified in a timely manner a late payment can be easily removed, just don’t make a habit of it. Some is better than none.

MICHAEL HALLETT

Dominion Lending Centres – Accredited Mortgage Professional
Michael is part of DLC Producers West Financial based in Coquitlam, BC