How does a credit report affect a mortgage application?

How does a credit report affect a mortgage application?

You are planning to get a mortgage and you hear for the first time that a credit report is required for your lender to see if you have good credit or not. How does this affect your application? 

The first thing you should know is a good credit report helps you get the mortgage loan you want. So, what is this credit report? (Check our previous blog on credit score, as they are both related). A credit report indicates the history of a person’s credit management and is used to determine risk of lending new money to an individual. It outlines all commercial transactions you have done, going back a certain number of years, as well as certain public records. It also shows a list of certain individuals or companies that have made inquiries about your credit history.  This document contains personal information, such as your name, address (or previous addresses), SIN, telephone number, date of birth and employment.  In Canada, there are two agencies who compile these reports: Trans Union and Equifax. 

What does it mean to have a good credit?  It is important to pay down credit cards and debts on due dates. You should know your credit limits in order to maintain a good score. Above all, contact the reporting agencies with any errors or discrepancies. Keeping your credit report accurate is very important, since it directly affects both your ability to get credit. You should get a copy of your credit report every year. You should review it and make sure the information on it is accurate. You will also be given a form to make any corrections to your report, which should be sent to the credit agency.

So, what will your credit report say? It will show when you got your credit cards, lines of credit, loans and mortgages, how much you owe, whether you make your payments on time, whether you miss payments, whether you go over your credit limit and inquires from anyone who has requested your credit report before. 

If you have any questions regarding your credit report, contact us.