The Truth About Credit Scores and Mortgage Borrowing
posted in Mortgage News
When it comes to mortgage borrowing, we all know that a credit score is taken into accountant by lenders, but did you know that the credit report they see, is not the one you might be seeing?
Credit scores and mortgage applications:
No matter who you get your most recent credit score from, when you submit your application for a mortgage, your chosen lender will not see the score that your chosen provider has given you; these scores will not be sufficient for lenders, instead, they will need a comprehensive and entirely different credit report in order to satisfy their criteria. If you’re working with a mortgage broker, they will take care of this for you, and will request signed consent to access the necessary report and send it with your application.
Fico Score 8; what is it and what does it mean for your mortgage application?
The majority of mortgage brokers submit their client’s applications along with an Equifax Canada credit report, and the most important element of this report, is the FICO Sore 8. This number is cited when a lender wants to know the credit score of an applicant, and most Canadian lenders, including the major banks, use it. However, Canadian consumers are not able to access their own FICO score. While mortgage lenders typically rely on the TransUnion credit report, or the Credit Vision Risk Score (or both), either can generate a FICO Score.
Experts now state that all providers of free credit scores, should standardize them to offer consumers a more practical score, especially for mortgage purposes, and that FICO 8 is the best of those on offer.
Should you be worried about your credit score?
It’s important to care about your credit score, since it’s needed for so many different things in life, from financing a car or a home, to applying for a job or tenancy agreement, for example, but the emphasis should really be placed upon something referred to as ‘credit hygiene’. Taking preventative measures to ensure that your personal credit history is ‘healthy’, is what credit hygiene is all about, and it’s vital. Always employ best practices, which see you being responsible with your credit, and your score and overall credit profile will remain optimized, and appear healthier in the eyes of lenders.
Your mortgage broker will undoubtedly have a wealth of knowledge surrounding credit scores and the whole mortgage application process, so if you need more advice and guidance, seek their help as soon as you can.