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Mortgage 101 – credit is the cornerstone of any deal | November 2022 Part 7

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7 and CityNews 101.1, the guys talk about the cornerstone of any deal: credit! We’re looking at credit misconceptions, what happens during and after a consumer proposal or bankruptcy, what actions impact your credit and so much more!

Mortgage 101 with Clinton Wilkins & Todd Veinotte: Credit is the cornerstone of any deal

Don’t feel like watching the video? Check out the transcript below.


Credit is the cornerstone of any deal

Todd Veinotte: [00:00:00:05] Welcome back to Mortgage 101, Your Guide to Homeownership with Clinton Wilkins and myself, Todd Veinotte on CityNews in Halifax and Ottawa. And we’re going to watch Financial Literacy Month and one of the pillars of Financial Literacy Month. It would obviously be credit. I think you’d agree with that.

Clinton Wilkins: [00:00:15:10] I would say that’s the number one thing that we get asked about every day.

Todd Veinotte: [00:00:18:14] So that’s Cornerstone? Of any deal?

Clinton Wilkins: [00:00:20:16] It’s really a cornerstone about a lot of things in your, Todd, not just mortgage lending. You know, if you’re buying a car, you’re getting a job, you’re renting an apartment, you know, you need a credit card. If you need to verify your identity.

There’s a lot of things that are involved with credit. And I think having good credit can certainly open up some doors. And I think having no credit can be very challenging. And I think having poor credit can be hard, too.

Todd Veinotte: [00:00:46:10] But the bottom line is, to the song, there are other chances. Give me another chance.

Clinton Wilkins: [00:00:54:00] Give me another chance. And you know what? One wrong doesn’t mean it’s wrong for life. You know what I mean?

Todd Veinotte: [00:00:59:03] Everybody makes mistakes.

Clinton Wilkins: [00:01:00:04] Yeah, everybody makes mistakes. And we do see it. You know, we’ve all made mistakes in the past.

Todd Veinotte: [00:01:04:05] Absolutely.

There’s a lot of misconceptions about credit

Clinton Wilkins: [00:01:05:02] So that being said, there’s a lot of misconceptions out there about credit. You know, a lot of people have literally no idea what credit is. And I think there’s a lot of misconceptions that people kind of go along in their life and they believe a certain thing.

You know, they’ve heard that once from maybe a professional or they’ve heard that from family or friends, and they just go along with it and it’s not always accurate.

Todd Veinotte: [00:01:30:16] What do you mean, have no idea about credit?

Clinton Wilkins: [00:01:33:10] Honestly, like we see a lot of customers that think their credit’s fine and the credit’s not good. And we see a lot of customers be like, I don’t know, I don’t think my credit not good and it’s perfect.

So I think there’s a lot of people that are just not aware of what’s going on with their credit. And I think that’s a really important thing to just learn about. Know where you’re at and know what you can do to either maintain or improve it.

Are kids learning about credit in schools?

Todd Veinotte: [00:01:56:12] Do you feel that these types of things could be taught at the at the scholastic level? I’m talking education.

Clinton Wilkins: [00:02:02:17] Definitely. Definitely. You know, when I think in high school, they, they talk about things like income and, you know, opening a bank account or all these things, but they don’t dive really into credit, and what is credit and how you can maintain good credit. I think that’s so important.

And you always hear about these stories that, you know, 19 year olds and 20 year olds are maybe going to school and they get their first credit card and they max it out.

Todd Veinotte: [00:02:28:13] Right.

Clinton Wilkins: [00:02:29:11] No one ever tells them. And I think parents don’t talk about credit enough because it’s taboo.

Todd Veinotte: [00:02:35:00] But is that even responsible? Because a little anecdote, back in the day, I had the same thing. I maxed out a credit card. And of course they started calling my parents house, you know, the collection agency when the time came again. Long ago. And my father basically told them, he said, “Look,

Todd Veinotte: [00:02:53:23] Like 30 years ago.

Todd Veinotte: [00:02:54:19] Or whatever. Longer than that! But basically, he said, “You want to give an 18 year old kid a credit card and then you you’re going to expect to collect it.” You know, you’re taking a big gamble, right?

Clinton Wilkins: [00:03:06:05] You’re certainly taking a big gamble. Oftentimes the gamble works out, Todd.

Todd Veinotte: [00:03:09:24] No, I get it but there is something to be said. That’s the point, though. People will make mistakes at that age.

You’re in the clear after six years

Clinton Wilkins: [00:03:15:06] Yeah, and I think a lot of mistakes that are made hopefully are when you’re young because you have time to then correct it. In Nova Scotia, the limit is six years to be able to collect.

So at six years it’s non collectable. And if there is any derogatory things that were on that credit bureau, it’s going to fall off. So if there was a written off account or collection or, you know, a bankruptcy that would come off after six years.

Todd Veinotte: [00:03:41:14] You think that’s fair? Do you think somebody, I guess it’s fair to the person that’s losing the obligation?

Clinton Wilkins: [00:03:47:25] Losing the obligation, Yeah. So is it fair? Is it not fair? In some provinces, I think it’s ten years. And some provinces it’s seven years. So I think Nova Scotia is probably one of the more liberal provinces in terms of like what that legislation looks like.

Todd Veinotte: [00:04:03:25] I’m just curious, though, why that would have been enshrined at one point, what the Enlightenment would have been for the beneficiary of society. So that, you know, obviously if people are perpetually indebted, they’ll never get out of that cycle. And then that’s probably the vision behind it. What do you think? I know we’re going to a deep dive on it.

Clinton Wilkins: [00:04:22:26] Yeah, I think that, you know, people make mistakes. They need some time to rehabilitate, maybe? And that’s kind of the time frame that they have set forth, at least here in Nova Scotia. You know, And you kind of touched on something there, like there’s some people that are forever indebted.

A consumer proposal or bankruptcy should be the last possible option

And I think there’s nothing wrong with a consumer proposal or bankruptcy if you do need to have a reset. And I think if you have to go through something like that, oftentimes it’s due to health issues, loss of employment, loss of business, matrimonial breakdown. Sometimes it’s just about poor money management and poor credit management. But people need a reset. And that doesn’t mean that you’re forever in purgatory or credit purgatory, I should say

Again, these things do fall off and you can also rebuild your credit, which I think is important. Sometimes I see people doing consumer proposals and bankruptcies when maybe they shouldn’t. I think some of these, you know, advisors and, and companies that offer those services, you know, they’re doing a sale too.

Todd Veinotte: [00:05:28:27] Yeah, they’re making money.

Clinton Wilkins: [00:05:29:19] They’re making money. Do you know what I mean? By ministering these, these programs. I really think that if a consumer does have a lot of equity in a property, sell your property and clean up your debt, or can you do a refinance and clean up your debt? I think going to a consumer proposal or bankruptcy is kind of like, that’s the last possible option.

Todd Veinotte: [00:05:47:20] Can you, if you wanted to keep your house though, and you’re going through that process, you can from what.

Clinton Wilkins: [00:05:53:21] You can do a bankruptcy. You’d have to pay back the equity piece. Or if you did a consumer proposal, that’s an orderly repayment of debts and it doesn’t impact the actual house itself.

Todd Veinotte: [00:06:03:02] But you can’t be sitting there with $100,000 in equity and say, “I’m going to go bankrupt and keep that equity in that house.”

Clinton Wilkins: [00:06:08:20] No, because there is a factor where you have to pay back any of the equity, any savings.

Todd Veinotte: [00:06:14:07] And that would be on the sale. That would be for intents and purposes lean on that?

Clinton Wilkins: [00:06:18:29] Yeah. Or you or you need to pay it back. So there’s certainly a time frame. So like there is like a quick release which I think takes nine or 12 months in Nova Scotia or sometimes it can take up to two or three years to be released from a bankruptcy, depending on if there is an overage for the income.

Todd Veinotte: [00:06:33:29] Right.

Your assets during a consumer proposal or bankruptcy

Clinton Wilkins: [00:06:34:12] Or if there’s an overage in terms of the assets, it’s all a proposal to the creditors. And the creditors have to agree, whether you’re doing a consumer proposal or bankruptcy. You just don’t get absolved and the court gets involved, obviously, if it is a bankruptcy and everybody kind of has to come together.

Oftentimes there are assets and the assets need to be liquidated to give certain like pennies on the dollar to the creditors. And I think, you know, if somebody does have a lot of assets, but maybe the assets are tied up. Or you’re not if you’re not willing or able to liquidate the assets for whatever reason, maybe a consumer proposal is the right way to go.

But I do see people that do have assets that there probably was another option. I think you need to look at all of your angles and weigh the pros and cons. I think sometimes people don’t like know what the long term implications are from some of these things. And, you know, we touched on it before.

A missed payment is a missed payment

Sometimes we have consumers that, you know, miss a payment and it’s a very small payment, like a $10 payment. They’re like, well, it’s only $10 payment. I’m making my $1,000 payment, but I’m going to skip my $10 payment. A missed payment is a missed payment. And to talk a little bit about credit, there’s two credit reporting agencies in Canada.

There’s Equifax and there’s TransUnion. And sometimes people kind of paint them as the bad guys. It’s like, “well, the credit bureaus messed up.” The credit bureaus, these agencies are only bringing the data. They’re aggregating data for data that’s given to them.

Clinton Wilkins: [00:08:03:03] And sometimes there are issues on the credit bureau. There’s mistakes, there’s duplications, and you can get mistakes fixed. Like you need to have the supporting documentation. Sometimes that takes time. And that’s why I think monitoring your credit is really important, especially if you’re planning on doing a big financial transaction. You can obviously do credit monitoring and we said this earlier in the month in our previous show.

Monitor your credit

You can do credit monitoring directly with Equifax or TransUnion, but there are free apps Borewell and Credit Karma. So I’d recommend consumers to download both of those and keep an eye on your credit. The credit scores in Canada are made up of a score out of 900, so 900 would be considered what a perfect score is. And there are unicorns out there, Todd, that do have 900 scores. I see them.

But good credit is typically above 700-720 as a score is considered like good, you know, under 700 if you’re like the high 600s, like 680, that’s okay. When you start getting down below 680 to 600, it’s kind of fair. And usually there’s been some issues either you are very heavily indebted compared your limits, compared to your balances. So that’s one of the main cornerstones with credit. Keep the balances down. Make the payments.

Obviously the payments, if you miss a payment that’s going to stay on for the six year period. And there’s other things that impact your credit, like credit inquiries. That’s one of the biggest misconceptions. People think that credit inquiries is the biggest thing that’s going to impact your credit. That only makes up about 10% of the score.

Todd Veinotte: [00:09:30:06] Oh, is that right? Yeah.

What impacts your credit score?

Clinton Wilkins: [00:09:30:27] But there’s other things like credit mix that impacts your score. And there are the addresses, like how often are you moving? And there’s a new address that reported to your credit bureau. That makes a difference. It all impacts how stable and reliable you are going to be as a credit risk, right?

Todd Veinotte: [00:09:45:29] Yeah, it all comes down to risk.

Clinton Wilkins: [00:09:47:00] It all really comes down to risk. And some people think that when you’re getting a mortgage, if you have the most amazing credit ever, you’re going to get a better rate. In our industry, typically you’re either approved or declined from a prime lender.

And if you can’t get approved for a prime lender, then we have to go to like a subprime or an alt lender. And yes, that will be a higher rate. But if you’re approved with a prime lender, everybody gets the same rate.

Todd Veinotte: [00:10:12:22] Yeah.

Credit isn’t everything when getting a mortgage

Clinton Wilkins: [00:10:13:08] Everybody gets the same rate. It’s not going to get you re not going to get a better rate just because the credit is better.

Todd Veinotte: [00:10:17:18] Now, can you.

Clinton Wilkins: [00:10:18:24] It’s a yes or no usually

Todd Veinotte: [00:10:19:28] It’s yes or no, but you can perhaps, is there any negotiation at all? Because do you ever say, look, “I’ve got a deal here, get two other lenders that want this? Can you cut us a deal at all?”

Clinton Wilkins: [00:10:29:23] I would say no.

Todd Veinotte: [00:10:31:00] No.

Clinton Wilkins: [00:10:31:10] At least for what we do, we give everyone the floor rate. I know some branch lenders, they start out at a higher rate and then you, like negotiate down and negotiate. We’re like the no haggle, you know?

Todd Veinotte: [00:10:45:01] Yeah.

Clinton Wilkins: [00:10:45:09] You know like when you’re buying a car and I think it’s the old adage is like when you’re buying domestic vehicle there’s a lot of negotiation. Right? But when you’re buying an import usually you pay the sticker price. It is what you what you what you get. With a mortgage broker, we’re trying to give everyone the best rate that we can give them.

Us here in Halifax, we’re not a discount brokerage. We consider ourselves a full service brokerage. You know, we have two offices and we have a lot of support and we give a lot of education. So we give the lowest rate that is available from the lenders that we deal do business with. Nice thing is we do a lot of business. So typically we get a very competitive rate. Are we the absolute lowest in the marketplace? No, because that’s a race to the bottom.

There’s always going to be somebody lower, right? So we definitely give a fair price and we give everyone the floor, because we really think that we’re giving clients, you know, advice and service and that the clients are going to come back and we’re giving them a fair shake. Right?

Yeah, because I think if you’re always racing to the bottom with the rates next time, guess what? Somebody else is going to race to the bottom. There is no bottom. The bottom just keeps on going down. So.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.