How To Improve Your Credit Score
By Karen Boies
Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay.
Which parts of a credit history are most important?
35% – Your Payment History
30% – Amounts You Owe
15% – Length of Your Credit History
10% – Types of Credit Used
10% – New Credit
Top 5 tips for improving your credit
1. Pay your bills on time.
Pay your bill in advance of the due date, ensuring it reaches the creditor before the payment is due. Pay off debt, don’t move it around. Owing the same amounts, but having fewer open accounts, can lower your score if you max out the accounts involved.
2. Contact your creditors as soon as you know you will have a problem paying bills on time.
Try to work out a payment arrangement and negotiate with them to keep at least a portion of the late notations off of your credit reports.
3. Reduce the number of active credit cards to 2 or 3 accounts.
Revolving credit includes department store cards, grocery store cards and gas cards. Establish a minimum of 2-3 trades with good repayment history for 24 months.
4. Keep account balances within 50% of the available credit limit.
Keep your credit card balances low. High debt-to-credit-limit ratios drive your scores down.
5. Pay or satisfy all outstanding collections and judgements.
It is advisable to avoid applying for credit and having your credit report checked unless you have a genuine need for credit. The risk to consumers with a lot of activity on their credit report over a short period of time is that a lender may interpret this as a sign that you are in financial difficulty or taking on more debt than you can manage. Fortunately most scoring systems will not penalize you if they determine that you are shopping for the best rate on a particular product like a mortgage.
Your credit score is important and you need to take action to make sure that you will be able to borrow money when you need it. If you currently have a low credit score don’t be discouraged. Take action. Start doing the things that will cause your credit score to improve. Be consistent and before you know it you will have better credit.
Karen Boies is a mobile mortgage planner in Greater Vancouver. If you have any questions about your credit score or about getting a mortgage, please call Karen at 604-726-9550 or email at Karen@mortgagecentrecitywide.com
Marriage and Separation: How To Separate Marital Property, Debt and Divorce
By Leah Coss
Whether you are married or common law, separating from your significant other can be one of the hardest things you will ever go through in your life. Even putting aside the wild emotions that can affect you during this time, the actual logistics of the parting can be the most trying of it all.
Why?
Because this is the part that tends to drag out, re-inflicting your hurt emotions, testing your patience and ability to work together with someone you have no interest in being around any more, and of course, the financial strains that can come from splitting up.
Often in a relationship that has gone bad, one or both of the people end up being worse off financially than when they started, and really if you think about it, this makes no sense. So long as you are making decent decisions in life with your money you should always be moving ahead, not backwards.
So how does this happen?
Usually it is either one person giving too much trust to the other after the break up, or both parties being so upset that important details fall through the cracks until it’s too late or that they are so stubborn in what they want or don’t want that nothing gets done until both parties credit score is shattered.
How can you protect yourself?
One of the absolute FIRST things that you should do if in this situation is separate all debt accounts. Split up credit cards that are joint, lines of credit, leases, and anything else that needs a monthly payment. Why? Because this is how your credit gets damaged for many years to come and will make it difficult to purchase a home on your own.
There are three ways this usually happens.
1. Through all the arguing and disagreements, bills don’t get paid. Perhaps you are arguing over a car lease and neither of you want to take on the payments or you think that he should pay the lines of credit down or she spent more on the credit card this month so she should make the payment, etc… and soon you are 3 months over due on your payments and your credit scores are destroyed.
2. An Abuse of Trust happens between the parted couple. Typically it is the women who do this (so ladies stop it) but, for example, they will allow their spouse to take the car and car lease. Maybe the husband can’t qualify for the lease on his own so she remains on the title. Perhaps the car gets into an accident and he stops making payments. Now her credit is suffering and she can do nothing about it.
3. Other possibilities is that one person simply forgets that they are on a joint credit card account and the other person charges up the card to the limit which also effects your credit AND now they are just as liable for paying it down as the one who charged it up.
When separating the debts, be sure to get a formal agreement in place to put an end to any future potential credit risks.
Obviously the house, or Matrimonial Home, is the big ticket item that takes the longest to sort out. Again, no matter how much you dislike each other or how stubborn you feel you need to be, DO NOT LET THESE PAYMENTS GO UNPAID! It is just not worth it. If you have to, be the bigger person, pay the mortgage payments on time and just document it so you can bring it up later during the settlement.
There are really just 4 ways that you can settle up the house issue.
1. Sell the home and divide it 50/50
2. One partner buys the other one out at an agreed upon price
These next 2 I REALLY do not recommend
3. Keeping the place and renting it out because neither of you want to lose the great location down town or the market is in a down turn and you don’t want to lose money on it, etc
4. One buys the other out but lets the other person rent the suite off of them or has some sort of lease agreement.
Even in the best of break ups, keeping in touch or having that one money issue between you two never works out. Just ask those with children who have to worry about child support issues that keep arising. The less that you can have keeping you together the sooner you can both move on and start your own, individual lives again.
At what point can you buy a new place of your own?
This is important.
Before a bank will look at you and loan you any money for a mortgage or otherwise, you must FIRST have a separation or divorce agreement IN PLACE; Not drafted up or discussed. It must be in writing with all the appropriate signatures and be signed in the presence of a notary or lawyer (not just signed between one another).
So if you are dragging out a formal separation or don’t want to go all the way through with the divorce for some ego or guilty conscience reasons, then you cannot buy a new home of your own without taking the risk that your “spouse” can claim rights to it and the banks don’t like to take this risk with their money.
The divorce or separation agreement must also spell out the following issues:
• If there is any Spousal Support being paid/received
• Child Support
• Any other ongoing Financial Obligations (house, car lease, etc)
The banks will require a copy of this divorce agreement to confirm the situation. And as mentioned before, make sure your debt accounts are separated as this will show up on your credit bureau.
There you have it. Hopefully this bit of reason and logic will help you through an emotional time.
Good luck in your future and if you have any financing questions about this topic or anything else, I am available 7 days a week by phone, email and online. 604.313.9996, Coss.L@mortgagecentre.com and MortgagesInVancouver.com Read more
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