Mortgage 101 – Pay your Taxes, Monitor your Credit Score

How important is your credit score? Clinton and Todd sit down at the Mortgage 101 table to discuss the significance of credit scores and financial health when buying a home. The two chat about the importance of understanding credit scores and repayment history, and the ongoing need for us to pay our taxes, monitor finances, particularly for self-employed individuals.

Todd Veinotte
Welcome back to Mortgage 101 your guide to homeownership with Clinton Wilkins and myself, Todd, Veinotte. Clinton Wilkins, listen, one of the things that we like to do is educate people. In this segment, let’s get into the nitty gritty about credit. That’s something that I think people really can’t know enough about.

Clinton Wilkins
I think there’s so many misconceptions just around credit in general. So I’ll just give you the basics, I’ll go off, and you can ask me questions. I think one of the big misconceptions, when you’re getting a pre-approval, is people don’t want to get their credit check, because they think it’s gonna bring down their score. Inquiries are important. You don’t want to get a whole bunch all at once. But inquiries only make up about 10% of your score. And a mortgage inquiry is good for typically 30 days, and during that 30 day period, you can technically get it checked by as many lenders as you want. Lenders don’t want you to know that because they don’t want you to shop around. I’m all about the education. I think we’re in the relationship business. So if you want to do business with me, great, if you don’t want to do business, that’s good too. There’s two credit reporting agencies in Canada. One is Equifax and the other one is TransUnion. A perfect score is out of 900. Unicorns could exist in theory with credit. But 900 is very, very rare. Typically, what we say, you know, an excellent score is like in the eight hundreds, a good score somewhere between like 700 and 800, and below 700, we’ll start asking you some questions, to be like, what’s going on here. We’ll start digging deeper into what’s going on in the credit bureau. We’ll see. And, you know, the one thing that really impacts credit is obviously repayment history. The other thing is utilization. So let’s say you have a $10,000 limit, but you have a $10,000 balance, that’s going to bring your your score down. Typically anything over 30-35% of leverage on the revolving accounts will bring that score down, you can always change your utilization. That is something you can impact from month to month. What you can’t change is missed payments. I see people missing payments for like a $10 payment, which is not ideal. And a lot of people have no idea what their credit looks like. There’s free credit monitoring services out there. Borrewell is one of them, you can download it on the App Store. And that is tied to Equifax. There’s also Credit Karma, and that will bring in the data from TransUnion. Some of our listeners also based on their online banking, some banks will offer credit monitoring as well. It might be a little bit diluted, but at least it’ll give you an idea about where things sit. And sometimes there’s errors on people’s credit bureaus like we fix them, I just fixed some things on Equifax the other day. We do have a process as mortgage brokers to fix things when there’s errors, which do happen. But I do think it’s important, like if you’re going to be doing a renewal, or a refinance, or buying your first home, know what’s going on with your credit, it’s so important. It’s definitely one of those key cornerstones on buying a house. And if your credit is not so good, it doesn’t mean you can’t get a mortgage, but, maybe you need to put a bigger down payment down. Or, maybe your interest rate might be a little bit higher, depending on what the setup is. But there certainly are alternative solutions for people that don’t have perfect credit.

Todd Veinotte
What type of information do you have to give these credit bureaus, because some people have concerns about privacy. And legitimately so! I think that’s a concern. So is it a social insurance number? What do you need to hand over to these companies?

Clinton Wilkins
Minimum you need a date of birth, first name, last name, an address. A SIN number will provide us with a more accurate credit bureau. Some borrowers will have duplicate credit bureaus for whatever reason, but you should always give your SIN number if you’re going to do a legitimate credit inquiry. It’s a good way for the credit bureau to identify you. And it will also make sure that we get the right Bureau and the information on there is correct. So I always encourage borrowers to give that SIN number. Some lenders absolutely require it, or report require confirmation of the SIN number. It’s another way for us to verify who you are, because of the SIN number you give us, matches your income documents, there is a good chance you get the right person. It’s an alternative verification of who you are as part of your identification. And if you’re borrowing money from the bank, they’re going to be reporting to the credit bureau anyway, so we want to make sure it gets reported to the correct credit bureau, so I always encourage people to give their SIN number if they’re going to do a legitimate credit inquiry.

Todd Veinotte
Do you ever run into identity theft issues?

Clinton Wilkins
Rarely, rarely, rarely do I see it. I did talk to a borrower today to say that their online banking got hacked, and they had $15,000 stolen out of their bank account. Luckily, their bank put it back in after four or five months. These things do happen. But if you’re monitoring your credit, you can catch it very early. And I think the earlier you catch things like identity theft, the easier it is to nip it in the bud.

Todd Veinotte
How shocked are you that some people never look at their A- transactions online? B- credit? They don’t open their bills! You’ve talked about this.

Clinton Wilkins
They don’t now what their RRSPs are, they don’t know the interest rate on their current mortgage, they don’t know their renewal date, sometimes they don’t even know what their lender name is. Not shocked! I’m not shocked at all people! And luckily, for us, our clients, they have us to take care of it. But you know, if you’re not dealing with us, you should know what is going on with your life. And you know, the first thing I do when I wake up, I just checked my online banking, to see, what went through my account? Did anything go in? Did anything get charged to my credit card? What’s going on with my RRSP? You know, I’m looking at these basic things every morning. It is one of the first things that I do.

Yeah, and obviously, if there is some identity theft, or there’s some compromised information, that’s going to show itself on all of the transactions.

It will show if you’re really keeping a close eye. Again, the sooner you nip these things in the bud, the better it will be for everybody. It’ll make your life I think a lot easier as a consumer. But it would also shock you Todd. When we’re doing a pre-approval, or refinance, renewal, whatever, we’re asking for some information like income documents, mortgage statements, property tax bills; it would shock you the people that don’t have their documents. Sometimes it takes people one week, two weeks, three weeks to get their documents together, because they don’t know where their documents are. And, especially at this time of year, I find it kind of strange, because people would have just filed their income tax. You would think you’d be able to know where to find your T4 in a pretty quick order, but people don’t have them.

Todd Veinotte
Notice of Assessment, that is something that you need to have, right? Your taxes need to be done, and current.

Clinton Wilkins
Especially if you are self employed! Especially, especially if you’re self employed, get those taxes done! And if you owe money, just pay CRA! I know, nobody likes paying CRA, but you’re already paying them if you’re getting deductions at source. Pay your taxes, because the interest rate from CRA is something like 9-10% right now. Pay those taxes, plus there are penalties for late filing, late paying, whatever. So if you owe, pay them, and if you do owe a good sizable amount, sometimes they will deem that you need to pay your quarterly installments. And guess what, if you owe next year, again, and you didn’t do your quarterly installments, you’re gonna pay penalties and interest on not doing those quarterly installments as well. Two things you can’t mess around with, or can’t get away from. One is taxes, the other one is death. Maybe it’s death and taxes. I don’t know which way that goes. But, don’t mess around. And don’t mess around with the tax man. They’re certainly back on their collection business. I can tell you the last couple of years, they weren’t so much because of COVID. They were kind of easing off, giving people a little bit of time to get their their stuff together. But, they will get you. You can’t can’t get away from them. And that’s the one thing when it really comes to self-employed. I know I’m kind of jumping around here a little bit. But, for those self-employed individuals, get your taxes done, I think they need to be done by June. You know, if you own a corporation and you get a dividend, you need to file with everybody else here, by the end of April like I did.

Todd Veinotte
A credit app with a Notice of Assessment, current, is always a good thing, right?

Clinton Wilkins
Especially knowing that you don’t owe any income tax, because income tax is a preferred creditor, they will go in front of all your other liabilities. So one thing you cannot get away from is the Canada Revenue Agency. That’s my plug for them! Pay those taxes! And let me tell you, as a mortgage lender and a broker, I’m collecting a lot of tax for CRA because I’m sending people in to pay those tax bills all the time. So, they can send me their Christmas card that they send me every year.

Todd Veinotte
All right. So if people listening are intrigued by what they’re hearing, they want to know more about what you do, what is the best way to check it all out.

Clinton Wilkins
Check us out online at Teamclinton.ca/radio. We have hundreds of blog posts, we’ve a secured online application. I think we might be one of the first brokerages around to have a secured portal, where you can do your online application at your own pace. We also have links to our rates, social media, you can see what Todd and I look like. We thank everyone for all the business and all the support over these years. And you know, I thank everybody for tuning in. We love doing Mortgage 101, and we love being part of the community at City News.