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Mortgage 101 – diving into your credit mix | November 2022 Part 4

n 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 credit! Watch, listen or read to find out some things you need to know about credit. Todd and Clinton dive into your credit mix, when Nova Scotians are in the clear after credit blunders, credit reporting agencies, building a credit picture to lenders, and fixing mistakes on credit reports.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: Diving into your “credit mix”

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

Transcript:

It’s time to talk about credit

Todd Veinotte: [00:00:00:00] We’re going to wrap things up. We’re going to talk about:

Clinton Wilkins: [00:00:03:09] Credit!

Todd Veinotte: [00:00:04:09] Credit died with a capital C, right?

Clinton Wilkins: [00:00:06:05] With a capital, capital C, yeah.

Todd Veinotte: [00:00:08:00] Credit, is it the straw that stirs the drink, or is it the drink?

Clinton Wilkins: [00:00:12:28] It may be the drink I don’t even know. It would definitely be the straw. I mean, it’s obviously a big piece. It’s not everything Todd.

Todd Veinotte: [00:00:20:07] No it’s not everything, but let’s face it, when somebody walks into your office and they sit down and you can pull up those scores, and those scores look nice, then you can go, “Ah, okay, now we can work.”

Clinton Wilkins: [00:00:29:19] It can certainly impact the direction.

Todd Veinotte: [00:00:31:06] Right.

Clinton Wilkins: [00:00:31:21] It certainly can impact the direction.

Todd Veinotte: [00:00:33:00] That’s right.

Diving into your credit mix

Clinton Wilkins: [00:00:33:19] And there are so many impacts to credit, Todd. You know, and it’s not just, some people are like, “My credit’s bad. My credit’s bad forever.” That’s not reality. Credit’s a snapshot in time and it’s really made up of your credit mix, so the type of accounts that you have. It’s made up of your payment history.

Obviously, that’s very important. And it’s made up of your limits compared to your balances. Obviously, the lower the balance, maybe the better the score. But the one thing and you can always change the balance, Todd, the one thing that you can’t erase is missed payments.

And I’ve seen people miss like $10 payments. You know, you beg, borrow and steal to make those payments because you can’t change those bad payments, but they’re not on there forever.

When you’re in the clear after credit blunders

Clinton Wilkins: [00:01:18:20] So that’s one thing that we should mention. Any derogatory things that are on the credit bureau, depending on the province. In Nova Scotia, they’re on there for six years.

So if you had a collection, if you had a bankruptcy or a first bankruptcy, if you have a written off account, and derogatory payments. They’re going to be off after six years. So I think that’s really important to remember. You’re not in purgatory for having some blemishes on your credit forever and ever.

Todd Veinotte: [00:01:44:26] Yeah.

Clinton Wilkins: [00:01:45:21] And sometimes people think having a blemish on their credit means they’re done. That’s not the case. You know, I think if you can justify it, if it’s isolated, if your payment history has been good since that point, I think there’s always a solution.

And I think that it’s about going with the best foot forward and having all the information. I think the more information that we know, you know, in the mortgage industry, the easier it is to kind of justify that.

“Bad credit doesn’t necessarily mean bad person.”

And also it helps us know which direction we need to go with the file, really. Now, let’s say that you had a major life event and you had some issues. There certainly are lenders that are tailored more towards clients that have some rougher credit. Because the credit really tells the lender what the character of the client is and really what their willingness is to pay.

Bad credit doesn’t necessarily mean bad person. So that’s really what I want to kind of break down, that misconception. You know, 90% of the clients that we see every day have like triple-A perfect credit.

Todd Veinotte: [00:02:49:21] Yeah.

Clinton Wilkins: [00:02:50:14] But 10% have had some challenges. And that could be because they had matrimonial breakdown. They could have had health issues. They could have had loss of business. And sometimes, Todd, I’ll be honest with you, sometimes it’s just mismanagement of money. That’s reality.

But I think make your mistakes, but don’t make the same mistake twice. You know, some people keep on making the same mistakes and sometimes they’re always like, in this perpetual challenge.

Todd Veinotte: [00:03:17:11] Yeah.

Clinton Wilkins: [00:03:18:20] And I think going into a tougher economic time, some customers are going to suffer some credit challenges. You know, if they are losing their job or if they’re losing their business, or obviously if the cost of goods are going up, it’s going to impact some people. It really, really is. And, you know, I think knowing what’s going on with your credit is really important. And there’s a couple of free apps that you can monitor your credit.

Credit reporting agencies

Todd Veinotte: [00:03:42:04] Right.

Clinton Wilkins: [00:03:42:26] So there’s two credit reporting agencies in Canada. There’s TransUnion and there’s Equifax. We primarily use Equifax. Some lenders will use both. Some lenders will only use TransUnion. Just kind of depends. So I’d recommend downloading both apps.

You can go directly to TransUnion or Equifax to get credit monitoring, and that’s typically a paid service, Todd. So not everybody wants to pay, of course. If you don’t mind being maybe displayed a few ads and sent a few emails, there are two free apps.

Credit apps: Borrowell and Equifax

They’re both available on the Apple App Store or on Google Play. And one’s called Credit Karma. And Credit Karma brings in the data from TransUnion, and the other one is Borrowell. And that brings in the data from Equifax. So it shows all your accounts, it shows any of your credit inquiries, and it shows all your payment history. And it gives you a score.

Now, the score that are on these apps doesn’t mean that’s a score that we’re going to see or your lender is going to see, because we use different versions of the credit bureau. But the data, all in all, Todd, should be very similar. It should be the same data. And there’s lots of times that we see issues on clients’, credit bureaus that are mistakes.

Todd Veinotte: [00:04:51:20] Right.

Clinton Wilkins: [00:04:52:12] And with Equifax, we actually have an investigation process where we’re able to work with Equifax and the consumer to investigate any issues. And sometimes we’ve had stuff resolved. So I think that if there’s an issue on your credit bureau, there can be a path to getting that fixed as well.

Don’t ignore your credit… please

Todd Veinotte: [00:05:07:21] Yeah, absolutely. But I think obviously if ignoring these things is the biggest mistake people make, right?

Clinton Wilkins: [00:05:18:05] Sometimes people put their head in the sand.

Todd Veinotte: [00:05:20:10] That’s right and they hope that it just goes away.

Clinton Wilkins: [00:05:22:11] It will eventually go away after six years. But six years is a long time.

Todd Veinotte: [00:05:24:28] Yeah, that’s right. And having open communication and dialogue with people who you are wanting to borrow money with, it’s also a massive thing. And we’ve talked a lot about that.

Sometimes clients are wrong about their credit scores

Clinton Wilkins: [00:05:34:12] I think being open and honest and like if there have been challenges, like give us the information. Like I want to advocate on people’s behalf, but if I don’t know, it’s really hard for me to put that best foot forward. And I think sometimes, like clients think they have kind of, not so great credit and they come in: Perfect.

Todd Veinotte: [00:05:53:06] Is that right?

Clinton Wilkins: [00:05:54:02] People just don’t know. You think people kind of would know. Then I have people be like, “No, I think it’s all good. It’s all fine.” And it’s a train wreck. So I think awareness, what’s going on with credit, keeping an eye on it: Really important. Especially, if you want to do a mortgage transaction, as you know, that’s one of our real cornerstones on what’s going on with mortgage lending.

So download Credit Karma. Download Borrowell, they’re free. If you don’t want the ads, then go directly to TransUnion or Equifax. They do have free versions, Todd, But you can pay for credit monitoring.

Todd Veinotte: [00:06:22:11] You don’t use the term trainwreck, though, when you’re talking to the clients, do you.

Clinton Wilkins: [00:06:24:27] No, like sometimes I’m like, “Wow, this is actually a trainwreck.” How are we going to get this and what’s the best foot forward? And you know, I’ve done 4,700 transactions. I think now more than 4,700. I think it might be like coming up on 4,800, I’m not sure. For about $1.2 billion worth of mortgages. Let me tell you, I’ve seen everything.

How you should use your credit card

My team has seen everything. Every day I see something new and sometimes it’s new stuff with credit and sometimes it’s just something new in general. One little tidbit before we kind of wrap up what we’re talking about with credit.

Clinton Wilkins: [00:06:55:26] Yeah.

Clinton Wilkins: [00:06:57:01] There’s no magic mix to credit. But I think having a balance between instalment credit and credit cards, really important. Use your credit card, pay it. Use it and pay it. Never go above 30%, 35%, 50% of the limit. Make sure you make all your payments and credit from major credit guarantors is better, i.e. bank lenders.

When you get credit from alternative sources like City Financial and Featherstone and stuff like that, that doesn’t look as favourable on a credit bureau. Typically, we want to see a consumer to have two years of good credit. At least two pieces of credit with at least a $2,000 limit. Use it and pay it, use it and pay it.

Building a credit picture

Todd Veinotte: [00:07:37:26] But sometimes the City Financial is a start.

Clinton Wilkins: [00:07:39:26] It’s a good start. And I think proving that you can make those payments and I think if you have very thin credit but you are renting, make sure you’re making your rent payments on time.

You know, there’s certainly non-reporting credit facilities that we can really build a good picture with. If you have very thin credit, but your credit, or you don’t have any credit at all, you know, build a story. Why don’t you?

Were you a non-resident or did you just not have any credit? And maybe if you have a cell phone or maybe if you have a lease for an apartment or something and you’re making those payments on time, that can certainly help. And we certainly have made a business case with kind of alternative credit sources, as well.

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.

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