Wednesday, November 21, 2012

What's the Score? How you can improve your credit score

The credit score, also referred to as a “FICO score,” is a mathematical formulae created by Fair, Issac and Company.
The credit score is used by most companies to decide if the applicant is a good credit risk or not. Equifax and Trans Union will calculate the numbers from the credit report and generate a number between 300 and 900.
A low score indicates a bad risk. A score of 680 or more puts the applicant in the lenders’ good books.
How scores are calculated:
Payment History
Bankruptcies, late payments, past due accounts and wage attachments, collections, judgements - none is better
Amounts Owed
Amount owed on accounts, proportion of balance to total credit limit - moderate use is best
Length of Credit History
Time since accounts opened, time since account activity – The longer you have had your account open, the better.
New Credit
Number of recent credit inquiries, number of recently opened accounts - less is best. 5 per year max.
Types of Credit
Number of various types of accounts (credit cards, retail cards, mortgage) - variety is good
Potential Totals
Fair Isaac reports that the American public's credit scores break out along these lines. It would be similar for Canadians.
Credit score
499 and below
2 percent
5 percent
8 percent
12 percent
15 percent
18 percent
27 percent
800 and above
13 percent
How Clients Can Improve Their Credit Score
  1. Order a copy of the credit report, review it carefully and correct any significant errors. 
  2. Pay bills on time. 
  3. If there is a questionable credit history, they could open a few new accounts and use them responsibly, paying them off on time. 
  4. Avoid opening accounts without intention of using them. You can, however, open it use it once and then maintain a balance of 0 which will build up your score.
  5. Having a credit card or instalment loan can help boost a credit score, as long as the balance is not too high. 
  6. Keep balance low in relation to available credit. If the credit limit is $1,000, keeping the balance below $500 (or 50 per cent of the limit) will improve the score. Balances of more than $750 (or 75 per cent of the limit) will decrease the score. Going over the limit has an even more negative effect and you can lose 35 points quickly.
  7. Pay off credit card debt instead of moving it around to lower rate cards. Moving balances to other credit cards (i.e., “balance transfer”) and closing an old account can hurt the score.
 If you would like advice on how to improve your credit score so that you can buy a home contact me through my website at    
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Monday, November 19, 2012

2/3's of Canadians pay off their mortgages early

Will Dunning, chief economist for CAAMP, The Canadian Association of Accredited Mortgage Professionals  , came out with a report recently on the effects of mortgage rule changes in July by the Finance department and general observations on the housing market in Canada in 2012.

     Here are some of his observations.
Will Dunning
     Here are some of his observations.

1-Since the most recent round of mortgage tightening came into effect in July 2012, there has been a drop in Canadian housing resale activity: between August and October, sales were 8 per cent lower than in the year prior to the announcement

2- Approximately 17 per cent of high ratio mortgages funded in 2010 could not have been funded today, including 11% of prospective high ratio homebuyers who can’t qualify under the new 25 year amortization rule

3-Regardless of whether Canadians initially selected a 20, 30, or even 40 year amortization period, survey findings continue to indicate that actual repayment periods have generally been only two-thirds of the contracted periods

4- It is not only first time buyers who are affected: reduced activity at entry levels means that move-up activity will also be gradually impacted, because potential move-up buyers will find it more difficult to sell their current homes

5- Canadians have continued to show prudence when it comes to mortgage repayment: one-third of borrowers made additional payments or accelerated payments on their mortgages; 87 per cent of homeowners have at least 25 per cent equity in their homes

6- 61 per cent of people who renewed in the past year saw a reduction in their interest rates

7- Among borrowers who took out a new mortgage in 2012, a record 47 per cent obtained
from a mortgage broker.

What do each of these items mean to you?

1-If you want to sell a home in Canada, you will probably have to keep it on the market for a longer period of time.

2-it’s getting harder for first time home buyers to qualify for a mortgage, therefore move up home buyers will have to lower their sale price or wait longer for a qualified buyer.

3- Canadians have and remain to be prudent. They will pay off their mortgages faster.

4- ditto #2

5- there’s more proof of Canadian financial prudence. This is how we have avoided the
bubble the U.S. experienced.

 In conclusion, the housing market is softening after 4 years and 4 changes to the mortgage rules. It will be harder to sell your starter home and move up to a bigger home unless you have substantial equity in your home.
 If you have questions, feel free to contact me As you can see almost half of Canadians are now using mortgage brokers. Why aren’t you?
David Cooke, your Calgary mortgage broker . Find his mortgage website at

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Thursday, November 8, 2012

Consumer delinquencies at lowest level since pre-recession according to Equifax Canada

Toronto, ON, November 6, 2012 - According to Equifax Canada’s Q3 Quarterly Credit Trends Report, as of September 30, 2012, consumer delinquencies have dropped to 1.22 per cent, the lowest level since before the financial crisis.

The report also reveals that total Canadian non-mortgage debt increased slightly by 1.8 per cent since last year.

Furthermore, credit card balances continue to decrease, while other credit products such as bank loans and lines of credit show very moderate growth compared to the same period last year.

The greatest increase was captive Auto Finance loans, which grew by 9 per cent over last year. The report revealed the Auto Finance loans have the lowest level of delinquency.

“To see serious delinquencies drop to a record low of 1.22 per cent is a very positive sign that consumers are doing a great job at managing their debt obligations,” says Nadim Abdo, Vice President, Consulting Solutions, Equifax Canada.  “The growth in credit over the past two years has slowed down significantly and the Canadian appetite for new credit has also diminished. According to Equifax’s Credit Seeking Index, which measures the velocity at which consumers are seeking new credit facilities,  consumer demand for new credit now is 9 per cent lower than it was prior to the financial crisis.”

Cristian deRitis, Senior Director of Consumer Credit Economics at Moody’s Analytics commented on the report by adding “consumer credit conditions in Canada remain stable and are in line with Moody’s Analytics projections for GDP growth and unemployment. Debt levels and available credit continue to rise, though at a slower pace than several years ago. Balances are declining for credit cards, personal finance and sales finance loans as borrowers turn to bank installment loans and lines of credit to meet their needs.  Auto financing continues to experience rapid expansion as Canadians flock to dealer lots and showrooms,” deRitis explained.

Other Equifax Report observations:
  • Average consumer non-mortgage indebtedness in Q3/2012 increased by 2.6 per cent in the last 12 months, compared to a growth of 4.4 per cent in the same period last year;
  • Average credit card debt has continued to decrease for the past eight quarters; it decreased by 3.6 per cent in Q3/2012 from the same period last year;
  • Average bank installment loans grew by 4 per cent over same period last year and average bank revolving loans (lines of credit) remained stable;
  • 90-day delinquencies continue to improve and have decreased to a rate of 1.22 per cent; and
  • Consumer bankruptcies slightly increased slightly by 5 per cent from the same period last year.
For detailed graphs, please go to:

for more information contact David Cooke, your Calgary mortgage broker. 

Thursday, November 1, 2012

Changes to Canada's mortgage rules - November 1, 2012

Dominion Lending Centres Westcor - Calgary
    Today we received a reminder from our lenders about the changes to mortgage rules in Canada as of today. The major change that will affect people today is that if you want a line of credit , the maximum that you will be able to access is up to 65% of the value of your home. This is down from 80% yesterday. As Canadians grapple with high debts on credit cards and loans, this will remove one way for them to consolidate their debts. I suspect there will be more unsecured loans and more people driven into bankruptcy.
        The other big change is with conventional uninsured mortgages. As of today you will have to qualify at the bank's 5 year  benchmark rate intead of the lower rate for 1-4 year mortgages. This may make it difficult for investors and some home buyers.
 We will have to wait to see what the repercussions are from this latest change to the mortgage rules.
 If you want more information or to discuss these changes you can contact me here.
 I have included the whole notification below for you to read over yourself.
As I suspect you are aware, OSFI - the regulator of all Canadian Financial Institutions, has imposed underwriting guidelines for Residential Mortgages on all regulated lenders and CMHC.  These underwriting guidelines are known as B20 and have been created at the insistence of the Financial Stability Board, the financial oversight organization of all G20 nations.  The creation of these guidelines is a direct result of the financial crisis caused by poor American mortgage lending practices.

My purpose in writing this is to give you, our valued brokers, an overview of the components of B20 in general terms.  I will explain to you what it means to your lender partners - at least to Optimum Mortgage and secondly, what it means to you. 

Components of B20
The Guideline sets out what OSFI considers to be prudent residential mortgage underwriting standards.  A residential mortgage is considered to be a loan or any other product, like a HELOC, that is secured by a residential property - up to a four-unit dwelling. 

The Guideline sets 5 principles for sound residential mortgage underwriting:

1.       All lenders must have a policy outlining risk appetite, governance and over site mechanisms to ensure lenders follow their own policies;

2.       Lenders must confirm the borrower’s identity, background and demonstrated willingness to service debt obligations on a timely basis;

3.       Lenders must assess the borrower’s capacity to service their debt obligations on a timely basis;

4.       Lenders must be satisfied that the value of the property being financed has been confirmed by an independent third party; and,

5.       Lenders must stress test their book of business with unlikely, but plausible scenarios to determine the impact to their business.  Lenders are expected to impose a higher level of due-diligence on higher risk deals, conduct ongoing risk-assessments on the insurers they use and generally pay close attention to the risk attached to their residential mortgage portfolio.
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