Mortgage Tips

Several years ago I happily paid off the last of my student loan in a fair sized lump sum. Or so I thought until I started receiving collections calls a year later. The bank had made a mistake and had listed me as having defaulted on my loan. In the end, it was the bank’s fault, but had I applied for a loan or mortgage at the time I would likely have been turned down.

This is why obtaining a copy of your credit report is essential, particularly before applying for a mortgage or any other credit such as loans for home improvements.

Why Bother Checking Your Credit Rating?

The problem with credit reports is that they frequently contain mistakes, many of which are not your fault. However, it’s up to you to correct them. With over 21 million credit reports open in Canada, it’s easy to see how minor data entry mistakes could happen, but it’s the major mistakes that you really need to worry about.

Credit Report vs. Credit Score

A credit report is a listing of all of your current and past debt history going back six years and includes a rating on how frequently you made payments on schedule.

A credit score is a mathematical formula that uses the data from you credit report to compile a three-digit number between 300 and 900. The closer you get to 900, the better your credit.

Checking Your Rating

In Canada, there are two companies that handle credit reporting: TransUnion and Equifax. While both of them offer your credit report and score online for a cost, you can also send away by snail mail for a free report.

Remember that it’s important to get a report from each company – just because one report is correct doesn’t mean that the other one won’t have a nasty surprise on it. In these days of identify theft, it’s also possible that someone is applying for credit and loans in your name without you knowing about it.

What should you do after you’ve received your reports?

• Ensure that your name and contact information is correct. You may want to update your address or name if you’ve recently made any changes.
• Take a look at the entries from companies that you’ve authorized to check your credit, such as landlords, phone or Internet providers.
• Look over every entry to ensure that everything looks right. If there are any discrepancies or accounts that have been opened in your name that you’re not aware of you need to contact the company who issued that credit.

Obviously, mistakes happen, but it’s best to know the score before you go and apply for a mortgage or any other major loan.