Mortgage 101 – It’s Financial Literacy Month!

Special host Dan Ahlstrand joins Clinton Wilkins to kick off Financial Literacy Month, emphasizing education on income, assets, and credit.

The Importance of Financial Education

Dan Ahlstrand
Well, feeling an 80s vibe on Mortgage 101 today.
How are you?

Clinton Wilkins
I’m doing great. Thanks for coming down. I appreciate you coming in. Obviously, Todd’s not with us this time, but I think he’s gonna be back soon.

Dan Ahlstrand
He did send me a note saying, don’t screw up, too bad, Dan!

Clinton Wilkins
I think it’s gonna be all good. And November is just so, so important. It’s Financial Literacy Month for us. It’s one of the most important months of the year. And really, this show, it’s all about education, and, we’re going to talk about some really great topics. We’re going to talk about income, we’re going to talk about assets, and we’re going to talk about credit, and we have some great guests joining us as well. So I think it’s going to be great.

Dan Ahlstrand
I’m looking forward to it, because every time you and I speak, I always learn something, and I know that the people that listen to Mortgage 101, learn something. So it’s helpful that it’s Financial Literacy Month, and we are going to hopefully educate a few people, I guess. Let’s set the table and explain why having an entire month dedicated to financial literacy is so important for Canadians.

Clinton Wilkins
You know what? I think we need to break it down for people. And I think sometimes people just put their head in the sand; I’ve used the word ostrich before. They avoid learning or knowing anything about personal finance. And finance is really important in general, but it’s the biggest part of people’s lives. When there’s so many things that it can be impacting, like your credit, can impact you getting a job or even renting an apartment or, obviously getting a mortgage, that’s very, very important. But you know, we’re talking about things like building assets. And as you know, Canadians that are homeowners are typically building assets a lot quicker. And there was actually a report out just recently that homeowners have just such a huge advantage over renters in terms of building net worth. So we’re going to talk, obviously a little bit more about that. And we are going to talk more about income. You know, more and more Canadians, they’re becoming self employed every day, and that can really be daunting. And I’ve seen clients that have gone from being employed to then being self employed, and they really just, like, fall on their face. So we’ll, we’ll talk all about these good topics, and we’re going to bring it all together on, how does it impact home ownership and obviously mortgage lending, and we’re going to just put a nice little bow on it.

Dan Ahlstrand
I talk to a lot of parents, Clinton, and and they tell me that the education system does a good job of teaching their kids the basics. They’re reading, they’re writing, the arithmetic, but the the nuances of day to day living maybe gets missed a little bit. And I think that’s why Financial Literacy Month, and the stuff that you do during Financial Literacy Month is so important, because it gives parents, and maybe soon to be parents, some extra tools to be able to function. Because when you get out of your parents house and you’re in your first apartment. That’s a big, open world that you know nothing about, right?

Clinton Wilkins
It can be very scary for people when you even think about just the basics of even writing a check; that’s not really taught in school anymore. You learned how to balance your checkbook. They don’t teach this anymore. They really should be teaching about credit – how do you build credit? How do you maintain credit? What are the 5 C’s of credit, for example? But I think overarching, there’s such a taboo of talking about your own personal finances or talking about the finances at the dinner table. And I hope that by us doing the show, it’s gonna break down some of these barriers. And I hope that parents will have conversations with their kids, and I hope that people will start having conversations with their spouses. It would shock you, Dan, people kind of operate as independent operators, even though they may be married or in a relationship; they’re not talking to their spouse about what’s going on with their income, assets or credit. It’s just so important.

Dan Ahlstrand
And some relationships, they keep everything separate, like the two people in a relationship, and that might work, but there could be downsides, and they don’t tell you about it.

Clinton Wilkins
Well, I certainly get the people into my office, and we try to sort that out, but sometimes we just have to very frank and open, honest conversations with people, and really, that’s our goal. Let’s break down some of the barriers. Let’s have the conversation at the dinner table tonight. Let’s talk to our kids about credits, what credit looks like, and, even talk to them about building credit. You know, sometimes having no credit is as bad as having bad credit. Right?

Credit and Its Impact on Daily Life

Dan Ahlstrand
And that was my next question. You hear a lot of horror stories with credit, with credit cards and people overdrawn and late payments and and collections and all of that bad stuff, but credit can be a useful tool. Can it not?

Clinton Wilkins
It certainly can be. You know, I think even just having credit that you’re monitoring, I think is important. There’s a a couple free tools out there, and we’ve mentioned it before, but there’s Borrowell and Credit Karma that, you know, customers can download from their app store and monitor their credit, and it will give them kind of gamified solutions on how to better build their credit. Yes, they’re gonna try to sell you some stuff. I mean, nothing comes for free in this life, but, you know, I think just building it up is so important. A lot of employers will check consumers credit before they hire them. That is a risk indicator. You know, when you go to get car insurance or home insurance, they can do a soft inquiry on the credit bureau. They’re going to see what’s on your credit, obviously, getting a mortgage. We’re doing a hard inquiry. We’re really digging deep into what does the history look like, what does the utilization look like? What does the credit mix look like? And we look at a lot of other indicators on the credit bureau. We look at, you know, names, we look at date of births, we look at, obviously, the sin number. We look at inquiries. We’re really digging deep into that credit bureau to really give the best credit analysis when we submit a file to a lender that then, if it’s going to be a high ratio transaction, then go to a mortgage insurer as well. You know, we’re not just spraying and praying here and hoping for the best and throwing things at the wall. We’re really doing some deep analysis on what does that credit look like, especially in a mortgage transaction.

Dan Ahlstrand
When somebody comes to you and wants to get a mortgage and you do the credit check on them. What are you looking for? Are you looking for a history of using credit and using it effectively? Are you looking to see how much credit they have, how many credit cards they have? Or is it a combination of everything?

Clinton Wilkins
I think it’s everything, and it’s more Dan, to be honest, we really look at, what is the breadth and the depth of the credit, you know, it’s not just how are the payments made. What is the mix? What is the utilization? You know, you can have, in theory, really great credit. You’re paying all your bills, but the score can be very low, and that can be really driven down by utilization. So for example, let’s say you have a $5,000 limit on your credit card. If your balance is at $5000 that’s not good. You never really want to go above about 30-35% of the credit limit. So obviously, utilization is very important. Payment History is very important. And really that mix of credit if you only have credit cards, probably not going to be the best. If you only have loans not gonna be the best. You wanna have a mix of the credit, but you wanna have significant credit. You know, having a $500 credit card is probably not gonna do the best for you in terms of building credit. We wanna see significant credit facilities. And the best credit facilities really come from, bank style lenders. There are some subprime lenders that obviously report to the credit bureau, things like, the old school, like Wells Fargo, City Financial, or maybe in today’s world Easy Financial. These are creditors that, yes, can potentially help you build your credit, but we don’t think of that as a prime credit like, that’s someone that can get credit anywhere will typically be given those type of facilities. It’s also the mix. You know, if you have a car loan and a credit card, that’s a pretty good mix. We want to see that you have at least two or three open facilities, and they need to be significant, like we’re talking $2,000 plus. And I think that’s really the way to build some good credit. But, if the credit is not good, Dan, it doesn’t necessarily mean that you can never transact. Obviously, transact. Obviously, we have solutions for people. Maybe if their credit is not the best, or if it’s being established, or they need our help to get it re established, we have solutions for those people. But I always say that you can have good credit in six years. It doesn’t matter if you messed up today, in six years, your credit can be repaired, because in Nova Scotia, any of these bad things, they fall off. They’re going to fall off your Equifax, and they’re going to fall off your Trans Union credit bureau six years after the date of the last activity. So you know, if you’ve had any challenges in the past, just make sure it’s going to be good going forward. But I see so many people missing just a small payment. Sometimes it’s a cell phone, sometimes it’s a student loan, and that can sometimes really hold them back, like if you have very thin credit and you’re missing payments on your cell phone, that can kill a whole transaction. And with cell phones, you know, oftentimes they’ll take an automatic payment get that set up to come off your credit card automatically. There’s lots of solutions to automate your life that’s going to make things much better for you. We

Dan Ahlstrand
How important is that number, that credit score number?

Clinton Wilkins
It’s not everything. Obviously the stronger the score, the easier it is for us. You know, if we’re seeing scores in the 800 plus, you have excellent credit between seven 800 it’s usually good. Anytime it’s really under 700 we’re digging more deep into the credit, to be honest. We’re looking at utilization, we’re looking at payment history, and I’m not saying we don’t look at it when the scores are high. We still do, but we’re really going to do a deep dive more into the credit the lower the score goes, and just figure out what is the issue, what’s bringing that score down? And sometimes we can just coach clients to increase it, and sometimes they can increase it in two or three months. It’s not easy sometimes, obviously it takes six years or somewhere in between. But there’s always a way to improve it and figure out what the best solution is.

Dan Ahlstrand
We’re off to a great start here on Mortgage 101, on this edition, Clinton Wilkins is here. I’m Dan Ahlstrand in for Todd Veinotte. We’ll be back after the break!