How Your Credit Score Affects Your Vancouver Mortgage – Ask Bruce Coleman, Vancouver Mortgage Broker
How Your Credit Score Affects Your Vancouver Mortgage
One of the key factors used by Vancouver mortgage lenders in determining whether you will qualify for a mortgage is your credit score. Your credit score may also impact the terms of your mortgage and your interest rates.
A Vancouver home mortgage is probably without a doubt one of the largest investments the average person will make in their lifetime. A mortgage is also considered a large loan by any lender.
Why is a Credit Score So Important?
A mortgage lender wants to learn as much as possible about your character. They want to know about your credit history because it tells them whether you are a responsible person who pays your debts and how well you pay them.
The lender is assuming a risk for any mortgage they issue so they would naturally want to minimize that risk as much as possible.
Your credit score is a reflection of all the debts that you have assumed and tells the lender about how responsibly you pay back your debts. A low credit score suggests you are irresponsible when it come to paying your debts which makes them very averse to taking you on as a potential client for a mortgage loan.
How your Credit Score Is Determined
The credit rating agencies are supplied information by lenders such as banks, credit unions, credit card agencies, department stores and others which detail the credit you have assumed and how well you re-pay it.
A credit report will consist of two parts. The first part of a credit report will outline the following information:
- Your payment history
- The overall amount of credit you currently owe
- How often you use credit or credit usage
- Your credit experience
- Whether you have acquired any new credit
- Types of the credit which you have established
The second part provides what is known as an “R” rating where you are given an overall rating ranging from R1 to R9. An R1 rating is the best possible rating and means that you have been paying all your required payments within 30 days. Naturally, an R9 rating is the worst possible rating that can be attached to your credit report.
The two main credit reporting in agencies are Equifax Canada and TransUnion Canada. Both of these credit reporting agencies will charge a fee for your credit report of roughly around $25.00
What Constitutes a Good Credit Score for a Mortgage?
The minimal credit score required by a mortgage lender varies slightly from lender to lender. The average minimal credit scores required by a mortgage lender generally range from between 620 to 680. Most lenders consider any score above the 700 range as being an excellent risk for a mortgage loan.
A low credit score can result in your application being rejected or having more restrictive terms or higher interest rate being charged. You may be required to get a co-signer or have other conditions applied.
In this day and age of identity theft which has become all too common place it’s a good idea to get hold of your credit report before you apply for a mortgage. Credit rating agencies also do make mistakes so if you find your credit score significantly lowered because of either of these issues you need to take prompt and appropriate steps to correct and rectify the problem before you apply for a mortgage.