Whats the Score – Your Credit Can Cost You Big
Knowing or not knowing your credit score can cost you thousands of dollars when shopping for a mortgage. Especially if you are looking for bad credit mortgage.
There is a focus on the beacon score in Canada but the beacon is not the complete story. The beacon is the result of a formula developed in the fifties by Fair Isaac by engineer Bill Fair and mathematician Earl Isaac. They developed the US version, FICO, as a measure of credit risk.
?The beacon is a measure of the potential for the borrower to default on their payments. The lower the score the more likely the borrower will default. That’s the theory anyway.
Here is my take on the whole story. My view is the result of calling credit for a “C” portfolio funded by private interests for the past fifteen years. The point is that I have lived with my decisions good and bad. My default rate is less then 1.0%…very good when you consider the average beacon is 400-525. ie Real Bad Credit.
The impact of bad credit on the lives of the people I lend to is significant. My interest rates average around 9%, low in comparison to my competitors like the TD Bank and Scotiabank whose alternative credit runs around 22-25%. The effect of these rates doubles the cost to the consumer.
Great for the banks…bad for the average Joe. What should you do?
When you apply for a mortgage will bad credit you will need a couple of years of good credit trade lines. You should have developed some savings and remained stable in your employment. A good description of the reason for poor credit is an excellent way to contrast your financial position now as opposed to when the poor credit occurred.
The reason for this is while your beacon score may have improved those pesky trade lines remain for seven years. The lesson in this article is that the beacon is not the full story.
Talk to a BC mortgage broker who is experienced in bad credit applications.
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Tags: average, bad credit, borrower, competitors, consumer, employment, financial, knowing-or-not, lower-the-score, mortgage rates current, traffic
