Credit Score and Home Mortgage

• The higher your credit score, the less interest you will pay. The lower your credit score, the more interest you will pay.
• Minimum credit score to qualify for a mortgage is 500
• No down payment mortgage requires a credit score of at least 680
• Having no credit is viewed as having bad credit.
• See how much interest you will pay and how big your monthly payments will be using credit score mortgage calculator. (examples only)

Credit Score Factors That Affect Your Mortgage Qualification

Your credit score is calculated using 5 different factors (check diagram to the right). Percentage shows how important each category is for home mortgage qualification. Read detailed description of each category below to learn how credit affects your home mortgage qualification and what you can do about it.

Payment History - approximately 35% of total credit score is based on payment history.

This section of credit score keeps track of:

• Slow / Late Payments - being late on credit cards, mortgages and other loans lowers your score. Paying your bills late is also bad for credit. Paying on time is one of the easiest ways to raise your score. For best mortgage interest rates - pay your credit cards and bills on time.
• Delinquency - skipping one payment makes you "delinquent". Once you are delinquent, your most recent payment is applied toward latest missed obligation. For example: if you skipped July payment, but paid in August, payment from August will go towards July. Delinquency on credit cards, loans and regular bills negatively affects your credit score. Pay all loans, credit cards and bills on time to have good score and to get lower rates from lenders.
• Collections - collections stay on your credit for 7 years. If collections are already on your credit report, it doesn't make a difference if you pay them off. It's a personal choice. Some lenders require you to pay off collections before giving you a mortgage, others don't... read more
• Number of Past Due Payments - The more payments you miss the worse are consequences on credit score. Lenders prefer to see clean payment history and no past due payments.
• Bankruptcy - kept on credit profile for 6 - 7 years. It's very hard to get a mortgage with "bankruptcy" on credit report.
• Mortgage Foreclosure - foreclosure happens when lender takes away property because of late mortgage payments. Foreclosure is as bad as bankruptcy and it stays on credit profile for 5 - 7 years. It's hard to get a mortgage with "foreclosure" on credit report.

Credit score agencies also track payments made on time, which usually raise your credit score.

Amounts Owed - approximately 30% of total credit score

This section of credit report tracks how much you owe in total, on all accounts, including mortgages, credit cards, car loans, student loans and other debts. It also tracks companies you owe money to, for how long, and how much.

Keep your credit card balances to absolute minimum to raise your credit. If possible, pay credits cards in full and only use them when you have the money to pay back right away.

Length Of Credit History - approximately 15% of the total score

This section tracks age of each credit account and time since last account activity. Try not to close your old credit cards, because they have more impact on credit score than new ones.

New Credit - approximately 10% of the total score is based on new accounts and inquiries

This part of credit report shows all applications you submitted for mortgages, credit cards, car loan, student loans, etc. Once you are approved, it documents the amount of money you're approved / disapproved for.

Your credit score will NOT go down if you apply with more than one mortgage lender... read more

Types of Credit Used - approximately 10% of total credit score

Larger loans have more impact on credit score than smaller ones. $200,000 mortgage has more weight than $10,000 credit line. A $10,000 credit line has more weight than a $1000 credit card. Do not worry about this section of credit report. Whatever loans you have are good to gain and keep good credit score.

A mortgage representative from your city will contact you and assist with mortgage selection.

Credit Score Example

Improving Your Credit Score

It's important to note that raising your credit score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. - fico.com

Tips to improve your credit score and to get lower interest rates:

• Pay your credit cards, student loans, bills and car loans on time.
• Do not go over credit limit. Try keeping credit card balances to a minimum. High credit balances cause credit score to go down, while low balances improve it (you have to use the credit though).
• Paying off collection account will NOT erase it from your history. Collection account stays on credit history for 7 years. Paying off collections is a personal choice and can actually hurt your score for several months... read more
• If you have bad credit, but open new credit cards (or get new loans) and pay on time - your credit score will go up.
• Get credit cards, but use them only when you have the cash to pay off whatever you bought right away. This keeps credit card balances low and shows fast payments, which is perfect for improving credit score.

Mortgage Credit Score Truths and Lies

Credit score affects interest rates - The higher your credit score the lower interest rates you will get. The lower your credit score, the higher interest rates you will get.

Bad credit will NOT be with you forever - You can fix your credit by paying your mortgage, loans and other debts on time. It will take several months, but you can you easily get high score if you just pay as agreed.

Credit score will NOT go down if you apply with many lenders while shopping for best mortgage interest rate - Your credit score will NOT go down if you apply with many mortgage lenders at once, here is why. When you apply for a mortgage, lenders request your credit score from credit bureaus. This request gets recorded by credit bureaus and then added to your credit report. If too many lenders request your credit score it could mean that you're constantly getting rejected, so there must be a problem. At least this was the belief by credit bureaus... but it's no longer true. Credit score agencies are aware of borrowers who apply with many lenders to get best interest rate they can. 10 or 20 applications in 30 days have no affect on your credit score, because its now viewed and recorded by credit bureaus as "interest rate shopping". If you apply with many lenders over a period of 30 days, it may lower your credit score, but doing it over a short period of time (under 30 days) has no impact. Read official statement from FICO regarding this. FICO is the company that invented credit score system used by credit bureaus in Canada.

Factors That DON'T Affect Credit Score

Age - your age makes no difference to credit score.

Income is very important to mortgage lenders, but it doesn't make any difference to your credit report. Learn how income affects your mortgage qualification.

Where you live - makes no difference.

Interest Rates charged on mortgages, credit cards and other loans have no impact on credit rating.

Social Support such as child care or disability income is not tracked by credit agencies.

Your Inquires for credit report don't affect your credit score.

Requests From Employers do not affect your credit score.

Credit Counseling is not tracked by credit agencies and has no impact.

What Information is in Your Credit Report?

Your name, address, Social Insurance Number, date of birth and employment. There are also credit cards, credit lines, mortgages, home equity lines, bankcards (debit cards), auto loans and student loans, including information about each, such as the date opened, credit limit, loan amount, account balance and payment history. Credit report also tracks number of inquiries you made, and all the companies that ever accessed your credit. Collections, bankruptcies, judgments, law suits and foreclosures are recorded as well.

What is FICO?

FICO is a credit sore system developed by Fair Isaac Corporation and used by all major Canadian credit bureaus like Equifax and TransUnion. When someone says FICO score they really mean "credit score", so there's no difference.

How Credit Bureaus Call FICO or credit score

Credit Score Bureaus

When you apply for a mortgage your credit score is obtained from one of the two agencies - Equifax or TransUnion. When you apply for a mortgage you do not pay for the credit report, lenders do, but you don't get to see the report. The only way you can access credit report is to buy it: Credit report costs between $14 to $25 dollars. You can obtain it from:

equifax.com

E-mail: NCC@equifax.com
Phone Number: 1 877 227-8800 (Customer Care department is open from 7am to 8pm, Monday - Friday and 8:30am to 8pm on Saturday (eastern time).

Address: Equifax Canada Inc.
Box 190 Jean Talon Station
Montreal, Quebec
H1S 2Z2

transunion.ca

For residents outside Quebec, please contact between the hours of 8:00 a.m.-8:00 p.m. ET at 1-800-663-9980

For residents of Quebec, please contact during the hours of 8:30 a.m.-5:00 p.m. ET (Monday to Thursday) and 8:30 a.m.-4:30 p.m. ET (Friday) at the following phone numbers: 1-877-713-3393 or 514-335-0374

Address All provinces except Quebec:
TransUnion
Attention: Fraud Victim Assistance Department
P.O. Box 338, LCD1
Hamilton, ON L8L 7W2

Address Quebec residents:
TransUnion
Centre De Relations Aux Consommateurs TransUnion
1 Place Laval Ouest
Suite 370
Laval, Quebec
H7N 1A1

More Credit Score Resources

• Understanding Credit Score - help you understand credit report once you actually get it.
• Financial Consumer Agency Canada Credit Score - Helpful information about credit score from Canadian Government
• Credit Score Education - how credit score is calculated, what affects your credit score and more information from company that invented credit score standards used today (FICO).
• Understanding Your Credit Report and Credit Score
• Understanding your FICO® score - booklet that will help you understand credit score better
• Your Credit Scores - This pamphlet provides a quick overview of what matters most in credit scores, and features two stories that illustrate how your FICO® score can change over time. It was jointly written by myFICO® and Consumer Federation of America.
• Credit Score Community Support Forums - get support regarding your credit score from community
• Credit Score QnA - questions people asked about credit score and answers they received. Your answer might be there.
• Credit 101 - a lot of useful credit score and debt resources from About.com
• 4 credit-scoring myths - MSN money
• Are credit problems cured by time? - a very helpful article from Mortgage Professor

Credit Score Forums

Forums below are from US, however, since both Canada and US use the same credit score system it doesn't make any difference.

• Credit Boards
• FICO Forum

Use credit score forums above to ask mortgage credit score related questions.

Mortgage interest rates are subject to change without notice. We attempt to maintain accuracy on our website, however, mortgage information on this website should be used only as a guideline. Please consult a mortgage professional before taking any action.