How big a RISK are you?
If you're looking for a mortgage, which must be insured, you will have to pay close attention to your BEACON/FICO Score.
As of October of 2008, insured mortgages require at least a 600 score (if you have less than 20% down-payment).
The lower your credit score is, the higher the interest rate will be.
If you've had trouble with late payments, or you're maxing out your credit cards, your score is probably falling and is probably at the point of qualifying you as a "B" client (banks won't like you).
If you fall under this category, you must start fixing your credit.
There will still be lenders who will work with you, but you will need a higher down-payment, and you will be charged a higher interest rate; and even if your credit becomes better 2 or 3 years down the road, these lenders won't let you refinance or break or your mortgage until the original term you signed up for (not all lenders are the same, but most "B" customers have to lock in for a minimum amount of time, with no flexibility until that time expires).
Depending on the type of mortgage you're looking for, the credit required varies.
If you're looking for investment properties, or you're self-employed, you may need a much higher score, than if you were simply looking for a single family home.
The following will give you an idea of how most lenders will raise the rates, based on your then current score (this is not necessarily something you can't negotiate, but that's how it starts):
Beacon/Fico Score of:
700+ = gets you the best rate
680-699 = adds 0.10 to 0.20 to the interest rate
650-679 = adds 0.30
620-649 = adds 0.40
600-619 = adds 0.50
580-599 = adds 1.50
540-579 = adds 2.00
500-539 = adds 3.50
As you can see, if you fall below 600, your monthly payments could end up costing you hundreds of Dollars more per month.
You should check your credit on a regular basis.
Sometimes there are mistakes on it. Sometimes items on your credit don't belong to you.
You need to keep an eye on it, so you can fix it immediately.
Even after you contact the credit companies, it takes them a while to fix it, and then it takes about 30 days from the ‘fix' date, to get updated, so if you're looking for credit in the meantime, it could have a negative impact.
The 2 things that really hurt your credit, are being more than 30 days late with your payments, and using up more than 70% of your available credit, especially on cards with high limits.
Keep your spending below 30%, to keep your score high.
Your current debt load also makes up a huge part of how they score you.
Keep your debt as low as possible. If you can't afford it, don't buy it.
Keep an eye on your credit and your credit score.
Make sure you pay your bills on time.
Make sure you don't max out your cards.
Call credit card companies and ask them to lower your limits; and ask for lower rates.
They will say no. You have to ask again.
If they say no, you ask to speak to a supervisor, a manager, etc., UNTIL you get to the person who agrees to lower the interest rate. They'll do it, but they will make you work for it.
The majority of the population has mistakes on their credit reports.
Manage yours. Fix the problems and pay your bills on time.
Don't wait until you need a mortgage or a loan, to start.
A perfect score is 900, but you should aim for at least 700.
Toronto Real Estate by Sylvie Conde, Broker
Sutton Group-Associates Realty Inc., Brokerage 416-966-0300
sconde@sutton.com
www.sylvieconde.com
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