I just gave a talk to a small group on this recently. Based on the feedback given, people were interested in knowing more or didn’t really see the relevance.

It’s hard to see the importance of credit, especially when you are just starting out in the “working” world. “I have a credit card, so what’s the big deal?”

The “big deal” today, unfortunately is identity theft. Currently the number one growing deptarment in all major banks. Due diligence is the word for both you and the bank.

The interesting part is you may not even be aware that someone has stolen your identity until try and apply for credit (loan, credit car, mortgage, etc.).

The simplest way to prevent it? Pull your own credit score! The first one is free (by law) and can be sent by mail. Other options will cost you depending on what you want. If you want it faxed to you or sent by e-mail, the cost can range from $15 to $25.

Pulling your own credit DOES NOT affect your credit score.

The two most common credit bureaus in North America are EquiFax and TransUnion.

www.equifax.com

www.transunion.com

As a mortgage broker, I would highly recommend getting the actual score with your report. it’s just not obvious from the report what your score may be.

To understand more about how your credit score is calculated check this site.

www.homebuying.about.com/cs/yourcreditrating/a/credit_score.htm

So, now you have your report with the score and it’s pretty good. Right?
Well, what happens if it’s not so good? Well the first thing to look at is where the source of the problem might be. Do you pay all your credit cards regularly? Missed a couple of payments in the last year? Your car loan up to date? Missed a payment a couple years ago when things were tight? Are all your cards maxed out? Every month? Great credit but denied a mortgage from your bank? Applied for 24 different cards in the last 6 months?

If it’s any (or all) of these things, then first and for most you need to come up with a plan. You need to be aware that everything you do that involves credit is kept and tracked for 7 years! The plan you come up with should include some form of a budget which includes paying at least the minimum on all cards.

Now I’ve seen a number of different sites comparing paying off the credit card with the highest amount vs paying the one with the highest interest rate. My conclusion? Pick one and stick with it. They both work. Please keep in mind that a) this is not a short term solution b) you can’t add anything new to the cards. The nice thing is after the first one is paid out, what ever amount you were paying towards the first is now all applied to the next card. The next one should be paid out much faster.

Now onto the other half of this blog, fixing your credit.

Assuming you are working on paying off one of those credit cards

Here’s tip #1. Always pay the minimum (or more) EARLY each month. Why early? The credit card companies like this. Not only will this potentially save you a few pennies each month (in interest) but the banks will be forced to reflect this new habit by increasing your score. What do I mean by early? A couple days before? No. I’m talking the day you get the statement, pay it. Don’t think about it. Don’t file it away. Go on line, go to the bank, write the check… however you pay for it, but do it THAT day!

Simple right? Procrastination is the enemy.

Tip #2. If you can, don’t let the amount owing on your credit exceed 75% of the credit limit. For example if you have a $2000 credit limit, keep the balance below $1500. Why? Simply, companies looking at your report want to know that if some unexpected expense you at least have some “room” to cover it. Or in other words, if something comes up you wont suddenly declare bankruptcy. For lenders, it’s all about calculated risk.

Tip #3. If the credit card companies have ever increased your limit, call them and ask them to put a note on your file to never increase it, unless you specifically request it. Why? Well, it turns out that it is possible to have “too much” unsecured credit. Even if this “extra” credit is “unused”, it can and will be calculated against you. For instance, certain mortgage lenders will see if you can afford a mortgage *if* all your credit is maxed out. If they determine your available credit is too high, they may suggest closing or reducing the amount of credit. The other option is they may simply deny the application.

Well, I hope that gives people some food for thought.

I’ve been told I have a unique writing style.

I’ve been told I should start a blog (acutally a journal) at some point.

Hopefully eveyrone will enjoy my blog stories on the fun and interesting things that I find out as a mortgage broker on a regular basis.

Let’s start with trying to get my own mortgage. The very first thing I find out is that most of the lenders we deal with (some 40+ different institutions) wont lend to brokers (or lawyers or appraisers). They call it a conflict of “interest” (no pun intended I think).

The good news, I did find one lender who was happy to lend my wife a mortgage. I’m not allowed to register my name on title. That way, I guess, they officially haven’t given “me” a mortgage directly, and thus avoiding an direct conflict.

At some point, I’ll also have my associated website up and running where I can direct you to links or software that I find along the way.

That’s it for now.