Mortgage 101 – Conquering Your Credit | November 13th

There’s so much to learn when it comes to the credit. Clinton Wilkins and Todd Veinotte are letting you know how to conquer your credit challenges in this latest edition of Mortgage 101. They discuss how free apps can help you monitor your credit, how to build and repair your credit and how to make use of credit reporting agencies. PLUS: What are the factors that go into good credit?

Todd Veinotte 00:00
It is Financial Literacy Month, as we have been talking about and welcome back to the show everybody, certainly, and a part of Financial Literacy Month what did we cover so far?

Clinton Wilkins 00:15
We talked about self-employment, and we’d really talked about keeping Financial Literacy Month going all year long.

Todd Veinotte 00:19
Yes that’s right.

Clinton Wilkins 00:20
Which we’ll obviously talk about some more.

Todd Veinotte 00:22
And we get into income we talked a lot about income.

Clinton Wilkins 00:24
We talked, talked about income. And I think later in the show, we’ll talk about assets. And but we really want to talk about right now. Credit. It’s so important.

Todd Veinotte 00:34
So first off, how do people know I guess when to credit, there’s, you’ve promoted these apps a lot. And people can check these, they’re free apps, two of them, I do believe, right? That you suggest people download.

Free apps help you stay accountable and monitor your credit

Clinton Wilkins 00:45
Two like really easy apps to download, you can download them from the Apple App Store, or the Google Play. Borrowell and Credit Karma. Borrowell is tied on to and brings in the data from Equifax and Credit Karma brings in the data from TransUnion. They’re both free apps. So prepare yourselves, you’re going to be sold. You know, they’re going to try to sell you a credit card or sell you alone, but just use their data, use their credit monitoring for free. If you’d prefer not to get ads, you can go on Equifax and you can go on TransUnion. And you can sign up for both of their credit monitoring services. Or you can just check your credit once, whatever you want to do. But these type of things come with a cost. The reason I’m promoting, you know, Borrowell and Credit Karma, they don’t give me anything, this is not a paid advertisement. But it’s free. So sometimes people are willing to get a little bit of ads, you know, to get something for free. I personally have them on my phone, I get the alerts all the time, I get the emails saying you know, you’re doing a good job, thumbs up. And you know, they will come to you to be like, oh, there’s something you can do better. And I like getting the feedback, it holds me accountable. Even though I know my credit is good. I monitor it. You know, I’ve had Equifax, I’ve had TransUnion, I’ve done mortgage lending, I know theories of what you should do. It’s almost like someone holding you accountable. Because they’ll send you an email to be like, oh don’t take your eye off the trigger or whatever. Or don’t take your foot off the gas, something funny like that. And it’s a great way to be held accountable. I typically go in and I, I do a class every couple, you know, months, there’s a high school that they want to have me in and we talk about financial literacy, we talk about things like credit and income and mortgage lending and all kinds of great things. And so I’ll give a shout out to miss Jodrey, she had me into her class for years, being a guest and talking about things like this. And we really like starting these kids at like 17, 18 years old, they’re just about going to get a credit card, you know what I mean? And just what does credit look like? And why you should build it like a lot of kids are scared of credit, like, oh, I don’t want that I don’t want to rack up a credit card. And it’s really good to start. And you know, start building.

Todd Veinotte 03:03
Okay, how much information do you have to give these companies thought, because some people are reluctant to give social insurance numbers and on these apps.

Clinton Wilkins 03:10
You have to give it all pretty much.

Todd Veinotte 03:11
You do? Yeah. So there are security concerns, because there are companies that that can that can mimic other companies. So you can go on. And so and I will be honest, I’m hesitant when it comes to this type of thing, because I’m concerned that am I giving the right company my information? What can I trust? So what tips do you have for people here?

Using credit reporting agencies

Clinton Wilkins 03:33
Well, I think that if you’re going to do, if you’re going to download these apps, make sure it’s the right app that you’re going to download.

Todd Veinotte 03:38
How do you know?

Clinton Wilkins 03:39
Well, I think there’s only one Borrowell on the App Store. And there’s only one Credit Karma on the App Store. So make sure it’s those right apps, maybe what you need to do is you need to google it first, make sure it’s the right one, then go from the website onto the App Store. That’s a good way to do it. But if you’re more comfortable going to the actual credit reporting agency themselves, go to TransUnion, go to Equifax. It will come with some costs, but at least you know you’re on the right site.

Todd Veinotte 04:06
Right. Yeah. So what type of costs are we talking?

Clinton Wilkins 04:09
You I think if you’re gonna do monthly monitoring, it’s like $20, $30 a month. Per credit bereau.

Todd Veinotte 04:15
That’s a little bit pricey, yeah.

Clinton Wilkins 04:16
That’s times two. And it’s important not just to do one you really need to Borrowell and Credit Karma. The data that they have is sometimes different. With Credit Karma, the good stuff stays on forever. So that is TransUnion. TransUnion, good things never fall off. With Equifax which uses Borrowell Equifax, the good stuff falls off six years after you have a closed account. So they can look very, very different. Some creditors will use TransUnion. Some creditors will use Equifax so it’s really important to keep an eye on both. Especially if you’re planning on doing a big transaction.

Monitoring your credit will improve your score

Todd Veinotte 04:51
Right. So what would you say the average of your clients are using these apps? How many people?

Clinton Wilkins 04:59
I would say less than 50%.

Todd Veinotte 05:01
Less than 50, yeah. Yeah, that’s right. So the big advantage, obviously, is that if people are using credit on your behalf nefariously and you’re not, you become cognizant of it right?

Clinton Wilkins 05:13
Yeah, I think like, if there is any, you know, identity theft, you can pick that up really quick. Or if you mess something up, you can find out. You know, I think that’s a really, really important. And, you know, I’ll bring it back to accountability. It’s really hard for an individual to be accountable to anyone but themselves. But I think if there’s an app telling you to be like, oh you could have done this better, or you need to do this, it will give you some feedback. It’s like that sounding board. And on average, people that download these credit monitoring apps, improve their credit, even if they have good credit, they still improve it, because they’re taking the tips and tricks from these apps and actioning them in reality.

What makes good credit?

Todd Veinotte 05:53
Yeah. So what is good credit, what’s the number, we hear anything, like over 700 is not bad?

Clinton Wilkins 05:58
So they’re both out of 900. So 900, would technically be a great score. And, you know, sometimes we say 900 is a unicorn, I’ve seen it, it does exist, you can believe or you can’t believe, whatever. Anything like over seven 700, 720, 730, 740 is excellent credit. When we start getting down in the 600’s, we start asking some more questions, you know, is there high utilization? Has there been miss payments? Has there been a previous bankruptcy or consumer proposal? You know, is there a collection or judgment? Are people you know, higher over limit? There’s so many things that can bring down people’s credit, and credit is really made up of a mix of how you’re paying your credit, your utilization, so the balance compared to the limit. The type of credit that you have. Is a credit all from, you know, be lenders like Fairstone, and stuff like that? Or is it a bunch of like credit unions and bank lenders, and having that type of mix is really, really important. And it also looks at revolving versus instalment payments. So do you have all credit cards? Do you have all loans? Or do you have a mix? And the perfect amount of credit is, credit that’s been around for a long time, some revolving, some instalment, all very low on the balance compared to the limit, and you making your payments on time. That’s the recipe of good credit. And if you’re trying to build your credit, we always say the two-two-two rule is what you need to follow. Two pieces of credit, a minimum of $2,000 for a minimum of two years, and that is typically the rough speed to at least have good credit, or to start rebuilding your credit.

Todd Veinotte 07:34
You’re saying carrying a balance of $2000?

Clinton Wilkins 07:36
A limit of $2000.

Todd Veinotte 07:37
Yesh, why carrying a balance? Why is that advantageous?

Clinton Wilkins 07:41
Well, not necessary. carrying a balance is important. So a limit of $2,000 is what you want, but you never want to go above 30% of the limit or it will start bringing your score down.

Building and repairing your credit

Todd Veinotte 07:50
Right. Yeah, absolutely. Yeah. Okay. So how long does it take for people to repair credit?

Clinton Wilkins 07:56
It depends. Yeah, I always say this depends. Sometimes people can fix their credit overnight. I’ve seen people with terrible scores, like in the 500s, that have been able to go from like 500 to 700 in the span of like two months.

Todd Veinotte 08:10
How?

Clinton Wilkins 08:11
Their credit was actually not that bad at 500. It was all driven by utilization. They had several trade lines, credit card, credit card, credit card line of credit, all over are at limit. Well, they came into some cash, they paid it down, paid it down, paid it down, waited for those all the report and the credit bureau. Good credit. They’ve never missed a payment, but their credit was low due to utilization. And that’s what I look at. When we pull a credit bureau, the first thing I’m looking at, it’s yeah, the score is important but I start looking at seeing how thick the credit bureau is. How is the utilization? How is the repayment? Are there any collections or judgments, things like that? Has there been a bankruptcy or consumer proposal? The score is not the only thing. Because guess what? A kid that’s 19 year old 19 years old, could have perfect credit. But someone who’s 50 years old, who’s had credit for 30 years might have a lower score, but their credit actually is much stronger. And we’ve looked at that every time.

Todd Veinotte 09:06
Yeah. So what’s the best way for young people to establish credit?

Clinton Wilkins 09:11
I think getting a credit card is a very first step right? You know, I would venture to say use it, I would say definitely use it, use it for your groceries, use it for your gas, use it for everything you can spend and pay it on make sure you pay it off every month. But when that statement generates, listen to me when this statement generates never let the balance be higher than 30% of the limit. So if your spending throughout the month is more, make a payment before the statement generates and that will ensure that your credit will be stronger when that reports.

Todd Veinotte 09:44
I see. Yeah, that’s a common mistake. I would think if people probably think as long as I pay it

Clinton Wilkins 09:48
I pay it off every month every month but if you’re at limit every month and paid off and limit every month, pay it off. That is going to bring your score down.

Todd Veinotte 09:55
Yeah, exactly.

Clinton Wilkins 09:57
You are the only one that can control your credit, open your mail, know what you owe, make your payments regular, automatic and on time. And really keep your balances as low as they can. If your balances get high, look at potentially like repositioning it, you know, a consolidation loan, a line of credit that can help and just pay down, pay down, pay down.

Todd Veinotte 10:19
And the good news is we got another segment to talk about some other things.

Clinton Wilkins 10:22
I can’t wait. We’re going to talk about assets and how you can build your net worth.

Todd Veinotte 10:25
Alright. Mortgage 101, your guide to homeownership, we will be right back.

Clinton Wilkins 10:38
If you’ve liked what you’ve heard, and you want to learn more, feel free to visit us online at Tim clinton.ca