Joan Manuel

ROYAL LEPAGE Sales Representative
Email: isellhomes@joanmanuel.com
(416) 443-0300

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Your Credit Record

If you have the right GDSR and TDSR but you have a poor credit record, you will often find professional lenders turning you down. Your credit history contains a detailed record of every charge account, credit card or credit purchase that you have made in the last seven years and in many cases even beyond seven years. Your credit record will show your high balance, your current balance and your payment record for every charge account or credit purchase in your name.

1. If you ran into some cash flow problems and you were late in making payments, it stays on your record.
2. If you had a disagreement with a merchant over some goods you purchased and you refused to make payments on that account, it stays on your account as payments not made.
3. If your account was charged in error and then the merchant discovered their mistake and corrected their own company records, there is no guarantee that your credit record at the Central Credit Bureau will have been set right.
4. If you applied for credit but you were turned down, even that event stays on your credit file. Every time anyone does an inquiry against your credit record the inquiry is recorded on your file and stays there. Too many inquiries will concern a professional lender. They will question, "Why did this applicant have so many inquiries against their file? Were they applying for credit? Were they turned down...and why?"
5. If you were late in making payments, there will be an R2 beside that account.
6. If you did not pay off an account for any reason, even if it was a legitimate complaint, your record will have an R9 beside that account. An R9 says, "This person does not pay his bills, he is a poor credit risk." One R9 on your credit record can be enough to scare away a professional lender.

These events will stay on your credit record for seven years or more and, in most cases, there is absolutely nothing you can do to remove them. Even with negative information on your credit file, you may still be able to arrange for a mortgage. However, you may have to pay a higher interest rate. A higher interest rate will be very expensive over the long run; therefore, if there is any negative information on your credit file, you should know about it and take appropriate action.

If you have any questions about your credit record, it would be a good idea to get a better understanding of your credit record before you apply for a mortgage.

1. Find out what is on your credit record;
2. If there is a problem, contact the merchant by registered mail;
3. Arrange to settle the account or to clear up any mistake;
4. Get a statement from the merchant in writing stating that the account has been settled to their satisfaction;
5. Send a registered letter along with a copy of the merchant's statement to the credit bureau asking them to adjust your record to show that the account has been settled;
6. Ask for written verification that your file has been corrected.

Other Qualification Methods:

There are three other evaluation methods you can use in approximating the price range of the home you should be considering.

Two And A Half Times Your Annual Gross Family Income

Some lenders will make a quick assessment of the size of mortgage you can handle by multiplying your annual gross family income by 2.5. In the case of Couple A, their annual gross family income of $72,000 would qualify them for a $180,000 mortgage. Assuming that they have $50,000 for a down payment, approval on a $180,000 mortgage, means that they should be looking at homes in the $200,000 to $230,000 range with the intention of not spending more than $230,000.

Four Times Your Down Payment

If you are applying for a conventional mortgage with a 25% down payment, then the price range you should be looking in will be four times the amount of your down payment. If you have $50,000 set aside for your down payment, then the price range you should be looking in is $200,000.

The size of your down payment will not necessarily qualify you for a mortgage. A professional lender will not advance funds beyond their estimation of your ability to pay, regardless of the size of your down payment.

Be Conservative

These qualification methods are useful in giving you a good idea of the price range of homes you should consider. Always take the most conservative approach, because a professional lender will take the most conservative calculation and use it as the basis for their decision.

The advantage of using several pre-qualification methods is that it gives you a lower and upper range of home prices for you to consider.

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NOTE: To obtain a copy of the book for yourself please do not hesitate to contact Joan Manuel.
If you would like to print out a copy of the provided portion of chapter 2 for your own reference please refer to the printable version.

Last Update: March 14, 2000

Copyright ^© 2000, Joan Manuel