Equifax Rolls Out Changes to its Mortgage Inquiry Process

Latest News & Economy DAZADA DIAMOND 21 Sep

Equifax Rolls Out Changes to its Mortgage Inquiry Process

Equifax Canada has implemented changes to its mortgage inquiry process to enhance the protection of consumer information.

The changes, which were first announced to the industry earlier this year, came into effect on September 14, including:

  • Requiring all lenders to have an identifying Member Number if they want to continue receiving files from brokers.
  • Only brokers who have signed amended contracts will be able to obtain credit files through industry connector platforms, such as Newton and Filogix.
  • Each and every inquiry will be posted with both the broker’s and lender’s name when using all industry connector platforms. Access to these files will be restricted to credentialed lenders.

“Essentially, we’ve made these changes for the primary benefit of the consumer,” Roger Mitchell, head of Financial Institutions Strategy & Innovation at Equifax Canada, told CMT. “By ensuring that all credit inquiries are posted to a consumer file, there will be a fuller and more accurate picture of who has access to consumers’ files. We feel doing this will strengthen consumer trust and provide the right level of transparency to consumers.”

Given that the changes were “fairly substantial,” Mitchell noted that Equifax worked hand-in-hand with all of the different stakeholders to ensure a smooth transition.

He added that industry feedback has been very positive. “Everyone understands the reasons why we’re doing this and the feedback and sign ups have been tremendous,” he said.

Benefits to Brokers and Lenders

While the new requirements were designed primarily to provide greater safeguarding and oversight to protect consumers, Mitchell notes there are additional benefits for industry partners.

Lenders benefit from a system that captures all consumer file activity and inquiries, which results in improved insights and analytics.

“We know that improved data accuracy leads to better credit decisions,” Mitchell said.

Brokers will similarly benefit from the access to additional data to help them better understand their client’s credit history. Equifax adds that an Enhanced Broker Credit Report is being launched to help brokers and lenders gain deeper insights into mortgage applicants and to help improve information accuracy.

Brokerages that have not yet signed their amended contracts can do so at the following address: https://www.equifax.ca/BOI/en/form

Lenders that have not yet been credentialed are asked to contact Equifax at na.account.services@equifax.com

  • https://www.canadianmortgagetrends.com/2020/09/equifax-rolls-out-changes-to-its-mortgage-inquiry-process/

CMHC: Don’t underestimate economic impact of COVID-19 on Canadian housing market

Banks & Bank of Canada DAZADA DIAMOND 9 Sep

CMHC: Don’t underestimate economic impact of COVID-19 on Canadian housing market

CMHC: DonThe Canadian housing sector will have to wrestle with some major short- and medium-term risks, particularly market uncertainty and weaker household incomes, according to the Canada Mortgage and Housing Corporation.

Despite strong recent performances in crucial markets, the prolonged economic impact of the coronavirus pandemic might continue influencing prices, sales, and new building projects, the Crown corporation said.

“While it will take several months for the economic impacts of COVID-19 to fully materialize, some factors are starting to work their way into in our financial results – for example, we are starting to see the impacts in our provisions for insurance claims,” said Lisa Williams, chief financial officer at CMHC.

Williams said that the agency is sufficiently equipped to respond to future market fluctuations.

“We remain in a strong financial position to bear the full impacts of COVID-19, and to take further steps to support Canadians and the economic recovery if necessary,” Williams said.

CMHC has reported net income of $566 million in the second quarter, considerably higher than the $379 million seen during the same time last year. Arrears stood at 0.34%, The Canadian Press reported.

However, the corporation’s claims expenses shot up by 711% to $256 million due to greater allocations for pandemic-related claims such as mortgages in deferral.

  • https://www.mortgagebrokernews.ca/news/cmhc-dont-underestimate-economic-impact-of-covid19-on-canadian-housing-market-332947.aspx

Mortgages driving Canadian consumer debt to $73,632 per person in Q2

Credit & Debt DAZADA DIAMOND 8 Sep

Mortgages driving Canadian consumer debt to $73,632 per person in Q2

Despite the slowing of credit-use by Canadian consumers on some fronts due to the COVID-19 pandemic, overall consumer debt continues to grow – and the main driver is a resurgent mortgages market.

That’s the finding of the latest Equifax Canada report on consumer credit conditions released this week. According to the report, Canadian consumer debt in Q2 2020 rose 2.8% from the same quarter last year, reaching just short of $2 trillion.

As home sales rebounded nationwide from March/April lows, average debt per person is now at $73,532, up 2.2% from the same time last year. This trend is in sharp contrast to other forms of credit like credit cards, auto loans and lines-of-credits, which fell in use overall during the pandemic.

“Mortgage activity has withstood the headwinds from COVID and showed the earliest signs of recovery,” said Rebecca Oakes, assistant vice president of advanced analytics at Equifax Canada, in a statement.

What also appears to be a clear trend is that Western Canada is more in debt than the rest of Canada. While non-mortgage debt loads are down across the board, Equifax found that the Western Region average debt in Q2 ($25,063) significantly outpaced that of the Eastern Region ($22,782).

In fact, the three provinces with the highest debt averages – Alberta ($28,261), British Columbia ($24,289) and Saskatchewan ($23,984) – are all in the west. The same is reflected in the statistics found in major cities, where Calgary ($28,890), Edmonton ($27,571) and Vancouver ($25,940) led the list of places where personal debt levels are highest.

In a separate interview, Oakes said the numbers reflect a combination of factors – some historical and others current in nature.

“Typically, the non-mortgage debt in the west is higher, and that’s driven a lot by lines of credit primarily,” Oakes said. “What we do see is the average cost for lines of credit in the west is 40-50% higher than what you can get in the east. So the debt level tend to be higher in the western side of the country.”

Oakes added that, on the current-events side of things, the impact of a struggling oil-and-gas sector is even clearer on the delinquency rate side of the equation. According to the Equifax report, delinquency rates in Eastern Canada actually fell by 3.28% in Q2; in the west, however, it grew by 12.63%.

“Obviously, there are different industries that support the west versus the east,” she said. “In Alberta, when you have changes in oil prices, that tend to have a knock-on impact on what happens with delinquency and lines of credit. So you can see the volatility of certain industries making an impact.”

  • https://biv.com/article/2020/09/mortgages-driving-canadian-consumer-debt-73632-person-q2

Alberta has the highest mortgage deferral rates in Canada

Credit & Debt DAZADA DIAMOND 27 Aug

Alberta has the highest mortgage deferral rates in Canada

Next highest rates were in Saskatchewan and Newfoundland, tied at 14.8 per cent

Alberta leads the country in mortgage deferrals, according to the CMHC. (Robson Fletcher/CBC)

Around one-in-five mortgages in Alberta remains in deferral, the highest rate of any province in the country, according to the Canada Mortgage and Housing Corporation.

CMHC president and CEO Evan Siddall said in a tweet on Tuesday that as of July, 21 per cent of mortgages in Alberta were deferred.

The next highest deferral rates were in Saskatchewan and Newfoundland, tied at 14.8 per cent.

“Deferrals in oil-producing regions are evidently elevated,” he wrote.

Quebec had the lowest rate at 5.6 per cent.

Siddall said around 11 per cent of all homeowner transactional insured mortgages are in deferral across the country, and that factors like unemployment rates and government supports will play a role in deferrals and house prices going forward.

Low oil prices had already hit Alberta’s economy hard before the coronavirus pandemic.

The Conference Board of Canada forecasts Alberta will see its economy shrink by a historic seven per cent this year.

Justin Havre with RE/MAX says the Alberta deferral numbers don’t come as much of a surprise.

“I think Albertans have gone through some tough times,” said Havre.

“We typically don’t have the opportunity to defer mortgage payments when there is a collapse in energy payments and when the opportunity was available to get mortgages deferred here in Alberta, I think a lot of people took the opportunity to preserve their cash because nobody really knew with this pandemic how long it would go on and what was going to come of it.”

Havre said he would encourage anyone having trouble making payments to be proactive, and speak with their bank and insurer.

“Don’t wait — take action now to find a solution, and if the solution has to be that you put your house up on the market, then you may want to start acting on that now while we have the activity in the marketplace, because our market typically does slow down when snow hits the ground.”

In May, Siddall had warned a House of Commons committee that the country could see a “deferral cliff” when some unemployed people are required to begin paying their mortgages again this fall.

  • https://www.cbc.ca/news/canada/calgary/cmhc-mortgage-deferral-1.5700021

The good and the bad in TransUnion’s recent data

Credit & Debt DAZADA DIAMOND 26 Aug

The good and the bad in TransUnion’s recent data

The good and the bad in TransUnionTwo recent reports released by TransUnion Canada shed new light on Canadian borrowers’ credit usage and their view of their own financial struggles heading into the seventh month of the COVID-19 pandemic.

In its Q2 Industry Insights Report, TransUnion found that while outstanding debt in Canada grew 4.3 percent to hit $1.9 trillion in the second quarter, only two products, installments and mortgages, contributed to the growth.

Installment debt rose by 3.9 percent to hit $175.4 billion, while mortgage debt was up 5.3 percent and now sits at over $1.3 trillion. Total credit card debt, driven by a decrease in holiday and home improvement expenditures, fell by 12.3 percent year-over-year in Q2, declining from $96.4 billion in 2019 to $84.6 billion at the end of June. Auto loan and line of credit debt fell by 3.3 percent and 3.2 percent, respectively, bringing their total amounts down to $62.4 billion (auto) and $248.9 billion (LOC).

According to TransUnion, mortgages were also the only product category to experience an increase in origination volume in the first quarter (originations have a reporting lag of one quarter), surging 29.2 percent year-over-year. Credit card originations, on the other hand, fell by 13.5 percent. COVID-19 played a role, but TransUnion explains that credit card originations had already been declining for several quarters prior to the pandemic due to market saturation. Auto loan originations decreased by an undisclosed amount.

While a decrease in consumer debt is welcomed news, especially with CMHC’s Evan Siddall warning lenders about the potentially damaging impact of high-ratio mortgages, Matt Fabian, director of financial services research and consulting at TransUnion, encourages Canadians not to read too much into the decline.

“It’s probably more a temporary thing that is COVID induced,” Fabian told Mortgage Broker News in an email.

Part of the decline, he explains, was due to record low spending, as consumers had fewer places to spend because of lockdown orders and were postponing larger purchases.

“Some consumers will continue to deleverage as credit fatigue sets in due to the economic impact of COVID-related shutdowns,” Fabian said, adding that seasonal levels of credit usage should return as the economy continues to stabilize.

TransUnion found that the number of consumers with delinquent balances actually fell by 10 basis points during the second quarter, led by a 14-basis point decrease in the credit card delinquency rate. The rate of mortgage delinquencies crept up by three basis points to hit 0.31 percent, while the rate of installment/personal loan delinquencies increased by 14 percent, a surge TransUnion attributes to alternative lenders “who have been slightly more aggressive in issuing personal loans to Below Prime consumers.”

Fabian credits deferral programs and government aid for the overall decrease in delinquencies.

“These seem to have been effective at supporting Canadians through the downturn. As these programs begin to wind down, we expect to see some increase in delinquency,” Fabian said.

TransUnion found that delinquency rates have been corresponding closely with borrowers’ CreditVision scores. Over 15 percent of Subprime consumers (those with scores between 300 and 639) and almost 13 percent of Near Prime customers (640 to 719) have taken a deferral on at least one credit product. For Super Prime consumers (above 800), only 6.1 percent have opted for a deferral.

TransUnion estimates that 2.6 million Canadians had at least one active deferral in Q2 2020.

Consumers’ situations slightly improving
The Industry Insights findings came on the heels of TransUnion’s most recent Financial Hardship Report. The report, based on an August 1-3 survey of 1,050 adults, found consumers to be more confident than at any time since the onset of the COVID-19 pandemic. While a still worrying 53 percent of respondents reported that their household is being negatively impacted by COVID-19, that represents a 10 percent improvement compared to the high seen in April. When asked if they expect to be impacted by COVID-19 “in the future”, only six percent responded yes.

But consumers feeling the bite COVID-19 has taken out of their earnings are experiencing serious doubts about their ability to stay on top of their debts and bill payments. Sixty-two percent of them said they are “concerned” about their ability to meet their future obligations, with credit cards, utilities and rent being the most problematic. Impacted consumers predicted that they will be unable to pay their bills or loans within 7.7 weeks of taking the survey. When that time comes, they expect their budgets to come up short by an average of $877.20.

No surprise, then, that the number of respondents indicating that they plan to make use of programs such as payment holidays or deferrals to help manage their debt loads increased from 10 to 13 percent month-over-month. Twenty-six percent of those reducing or holding off on making their payments said they hope to extend their deferral periods further.

But not everyone is struggling. The proportion of consumers utilizing deferrals or payment holidays shrunk from 18 to 16 percent, and the majority of mortgage (52 percent) and auto loan (54 percent) customers have already returned to making full payments.

When asked if TransUnion is worried by the growth in mortgage borrowing at a time when so many Canadians say they are still being impacted negatively by COVID-19, Fabian expressed little concern.

“There’s always a worry about fall in house prices, but demand will likely keep values high,” he said. “The new stress testing measures introduced in 2018 have been effective in driving down qualifying mortgage values, which should offset some of this concern. Delinquency rates for mortgages remain relatively stable.”

  • https://www.mortgagebrokernews.ca/news/the-good-and-the-bad-in-transunions-recent-data-332657.aspx?utm_source=GA&utm_medium=20200825&utm_campaign=MBNW-Newsletter-20200825&utm_content=CAB225E9-A56E-4453-BA7A-30CBD695B619&tu=CAB225E9-A56E-4453-BA7A-30CBD695B619

Here’s What Canada’s Mortgage Deferral Cliff Looks Like, And Why Experts Are Worried

Credit & Debt DAZADA DIAMOND 25 Aug

Here’s What Canada’s Mortgage Deferral Cliff Looks Like, And Why Experts Are Worried

Canadian real estate buyers are jumping in head first, since the recession didn’t impact housing. However, since the beginning of the pandemic, experts said no issues would be apparent until the end of the year. The reason is a term only finance and banking nerds have been using – the deferral cliff. The deferral cliff is the expiration of programs that bought distressed owners a few extra months. Until the deferral cliff arrives, we won’t see any of the problems in the housing market. Here’s when it’s coming, and when you should see an impact.

Mortgage Deferral Cliff

The mortgage deferral cliff is when payment deferral plans begin to expire. After the pandemic driven shutdown, Canadian and US governments scrambled to get banks to defer mortgage payments for the unemployed. Starting in April, people without income were allowed to delay payments for up to 6 months. This eliminated the spike in arrears we would normally see during a recession. It also happens to restrain inventory from hitting the market. As the six month deferral period ends, homeowners that aren’t back on their feet, are going to have to deal with their housing woes.

Industry experts warned mortgage deferrals give a false sense of security. Since people haven’t seen any defaults or distressed sales, moral hazard was created. That is, people now think housing markets have no risk. However, this is only temporary. As these deferrals expire, we approach the cliff. Once we get there, a significant number of people that haven’t got back on their feet will start to surface.

Most Canadian Mortgage Payment Deferrals Will Expire In October

Since the longest deferrals are six months, we don’t really see any issues pop up until October. In October, about ~500,000 mortgages should expire. Followed by another 221,000 in November, and a big dip lower to 15,000 in December. There’s a mild bump higher with 24,000 in January, and February won’t be known until the cut off is reached next month.

Canadian Mortgage Deferral Cliff

The estimated number of expirations of payment deferrals for Canadian mortgages.

Oct 2020Nov 2020Dec 2020Jan 20210100,000200,000300,000400,000500,000Mortgages

Month Mortgages
Oct 2020 500,000
Nov 2020 221,000
Dec 2020 15,000
Jan 2021 24,000

Source: Bank filings, Better Dwelling.

Now, don’t confuse the expiration of payment deferrals with a spike in arrears rates. It takes 90 days of non-payment for a mortgage to fall into arrears. This means October’s surge wouldn’t see any contribution to arrears until January. November would be in February, etc… That said, rising arrear rates depend on liquidity.

If you can’t afford your home, what’s the first thing you do? List it for sale. The inability to pay doesn’t always turn into defaults when there’s buyers. Instead, people list their homes for sale and hope it sells and closes before the lender tries to claim it. Unless you’re not all that smart, this is the first thing you would look to do. In which case, we should see a spike in inventory first.

Rising inventory tends to give buyers more options, which turns into longer selling times. When you can’t dispose of your home in a timely fashion, that’s when defaults rise. This would explain why everyone from the CMHC to the Bank of Canada never expected arrears rates to rise this year. Rising inventory is expected later this year, and defaults are forecasted to climb next year.

  • https://betterdwelling.com/heres-what-canadas-mortgage-deferral-cliff-looks-like-and-why-experts-are-worried/

Prospective home buyers feel the heat over new mortgage rules, but all hope is not lost, industry leaders say

Credit & Debt DAZADA DIAMOND 8 Jul

Prospective home buyers feel the heat over new mortgage rules, but all hope is not lost, industry leaders say

Nathan Scott and his fiancée, Dianna Yanchis, are thinking about leaving Liberty Village behind for a home in the suburbs that offers a bit of green space. Luckily, says Scott, 27, they had their mortgage approved in May before the Canada Mortgage and Housing Corp. (CMHC) announced changes to its rules for obtaining an insured mortgage.

“We have four months locked in,” said Scott. “If we don’t buy during that time, we’ll have to resubmit our paperwork and go through the process again. By then, CMHC’s changes will be in effect.”

Mortgage default insurance is mandatory in Canada for anyone making a down payment between five per cent and 19.99 per cent of a home’s purchase price.

CMHC, the federal Crown Corporation that is Canada’s largest underwriter for mortgage default insurance, announced June 4 that it was tightening its rules for obtaining it. The new rules, effective July 1, mean applicants must carry less debt (39 per cent of gross income vs. 44 per cent); will need a better credit score (680 vs. 600) and gross debt/total debt service ratios of 35 per cent and 42 per cent, respectively; and won’t be able to borrow money from a line of credit or elsewhere to make their down payment.

However, for the moment, the two private mortgage insurers, Genworth Financial and Canada Guaranty, have said they will not follow suit.

“We are fine credit-wise, because we have a pretty high score,” said Scott, “but we might get less money (in terms of the approved mortgage amount) if we have to reapply. Having the other two lenders say they won’t follow CMHC’s lead helps.”

Mortgage broker Jerome Trail, owner of the Mortgage Trail Inc. in Toronto, says there will be no impact on the individual borrower.

“When CMHC made the announcement, it was very dramatic, and there was a media storm within the industry,” Trail said. “Then the other two insurers said they were content with the current underwriters’ guidelines and had no plans to make changes, so it was a big flap about nothing.”

CMHC itself may see the biggest difference, Trail noted, because the major change in its required credit score to 680 from 600 will disqualify about 10 per cent of its usual applicants. A credit score of 580-669 is considered fair, according to Experian.com, and a score of 670-739 is considered good.

Philip Weir, mortgage broker and president of a Dominion Lending Centre in Vaughan, says CMHC’s recent rule tightening seems to be another obstacle for first-time home buyers, following the 2018 implementation of the stress test, which requires buyers to demonstrate that they can keep up with mortgage payments despite changing interest rates.

“The inability to use borrowed money for a down payment hurts young kids trying to get into the housing market,” Weir said. “Most lenders deal with all three insurers, so they will send the mortgage applications to the others.

“So far, so good — it has really affected nobody.”

Robert McLister, the mortgage editor at rates.ca, says the private insurers will get the non-CMHC compliant mortgages to handle and speculates that Genworth and Canada Guaranty could eventually charge higher insurance premiums for their flexibility regarding qualifications.

At present, however, “you as the borrower won’t even know what’s happening.”

McLister expects to see CMHC “take up to a 20 per cent hit on its mortgage business,” but noted that “insurers don’t only want all the castaways, so they (the two private insurers) may tighten their own rules.”

Calculating your scores

For prospective buyers, it’s helpful to be prepared by knowing your credit score and debt service ratio before applying for a mortgage.

Credit scores fall into a range from 300 to 850 and are determined by an algorithm using the information from an individual’s credit report, which includes whether bills are paid on time and how much credit card debt is carried by an individual. A credit score is used by lenders to decide who gets a loan, what the interest rate will be on that loan and an individual’s credit limit.

The two agencies that determine credit scores for Canadians are Equifax and TransUnion and they provide credit reports, scores and monitoring to consumers for a price. However, there are websites that offer a free credit score and credit report: Borrowell for Equifax and Credit Karma for TransUnion information.

Gross debt service (GDS) ratio and total debt service (TDS) ratio are the measurements used by mortgage insurers to determine if a borrower can manage monthly mortgage payments and repay borrowed money. The GDS informs the lender about the percentage of your monthly income that goes toward housing costs, while the TDS tells the lender at a glance what percentage of a prospective homeowner’s income is used to pay debts, including rent, credit card bills, child support and car loans. CMHC requires a GDS of 35 per cent or less and a TDS of 42 per cent or lower.

You can determine your GDS ratio by adding together your monthly rent/mortgage cost (principal only), the related interest, your property taxes and your heating costs and divide by your gross monthly income. For example, if you earn $12,000 in gross monthly income and pay $3,500 in rent and $100 for heat each month, your GDS is $4,000/$12,000 or 33 per cent.

Calculate your TDS by adding together your rent/mortgage principal, the related interest, your property taxes, your heat and other debt obligation and divide by your gross income. (You can calculate both ratios using monthly income or annual income.) For example, if your monthly mortgage payment is $3,500, your interest is $100, you pay an auto loan of $1,000 monthly and credit card payments of $400 monthly, your debt-to-income ratio is $5,000 ($3,500 + $100 + $1,000 + $400) divided by $12,000, or 42 per cent.

  • https://www.thepeterboroughexaminer.com/ts/business/personal_finance/2020/07/07/prospective-home-buyers-feel-the-heat-over-new-mortgage-rules-but-all-hope-is-not-lost-industry-leaders-say.html

Five Tips to Increase Your Credit Score Quickly

Credit & Debt DAZADA DIAMOND 7 Jul

Five Tips to Increase Your Credit Score Quickly

In order to qualify for certain mortgage and loan products, a minimum credit score is essential. Even if your score is sufficient to qualify, you might find the rates being offered will be lower than if you had a higher score.

Having worked with thousands of personal credit histories over the years, we have developed some strategies that sometimes give you that much needed quick score boostsort of like jumper cables for credit!

tips to improve your credit scoreHere are a few scenarios this might help with:

  • You are being pre-approved for a mortgage, but your bank or broker remark your score is too low and you don’t qualify.
  • You want to qualify for a mortgage AND a home equity line of credit (HELOC), but your lender says you need a higher score to get both.
  • You are working with a mortgage broker who is arranging a mortgage with a B-lender for you. She tells you that your interest rate will be lower if your Equifax Fico score is over 680.

And it’s not just about homeownership…

  • You are preparing your pitch to prospective landlords. These days, that often includes your credit report. Your chances will be better if your score is in the 700s or even 800s.
  • You want to apply for a personal line of credit or a high-end personal credit card, but your score is too low.

1. Use The Optimal Utilization Strategy

When maximizing your personal credit score, you should look at your utilization of available credit for each individual credit facility. By this I mean what percentage of your available credit is the balance being reported?

Percentage utilization can have a significant impact on your personal credit score. Equifax Canada states utilization has a 30% weighting on your personal credit score.

Optimal Utilization Strategy for credit scoreOne scenario: maybe a furniture store or a home improvement store offered you “don’t pay for one year.” The balance you are carrying on this card might be relatively small, but if it’s at or over the actual card limit, this is dragging down your personal credit score. Consider paying it off now!

Another scenario: suppose you have three credit cards, each with a limit of $10,000.

And let’s say one card has a balance owing of $9,900 and the other two have zero balances. This might happen because you are trying to earn rewards on one particular card, or maybe you said yes to a balance transfer promotional offer.

Chances are your credit score is lower than if the usage was spread across the three cards equallyi.e., each with a balance owing of $3,300, or 33% of the limit.

Overall, your usage remains unchanged, but now you no longer have an individual card reporting at 99% utilization.

If you can afford to cover or reduce the balance owing on the one with a balance of $9,900, you should see a nice little score boost.

2. Use the Statement Date Strategy

It may be that the best thing for you to do is simply reduce balances owing on your credit facilities. If time is of the essence, you should plan this carefully and do it in the correct order.

Gather up your most recent available statements for all relevant credit facilities. And note the day of the month when the statement was printed. Most of the time it’s the balance on that statement date that is being reported to the credit bureau.

And give or take a day, it is safe to assume that same day of the following month is when the next statement will be issued.

So, plan your payments accordingly. And allow several business days for online payments to process in time. If you are paying a credit card issued by your own bank, you should see transfer payments being processed either instantly or overnight.

3. Pay It Down and Keep It Down

pay down your debtThis is especially important when your limits are not very large. Suppose you are a model citizen who uses her credit card frequently, and pays the balance in full every month after receiving the monthly statement, and before the due date.

That is the “correct way” to manage your credittaking advantage of the grace period you are given by all card issuers.

But these days, there is little benefit to trying to use up the entire grace period because current account interest rates are so low they are pretty much negligible. It’s far better to pay your balance in full before your statements come out. You are even more of a model citizen, and now the balance being reported to the credit bureau will always be extremely small, if anything.

4. Exercise All Dormant Credit Cards and Lines of Credit

Some people have credit facilities they never use. People tend to favour one particular credit card (maybe we like their rewards program) and we might neglect our other cards. And most of the time we don’t even need our personal line of credit.

If you are trying to maximize your credit score, it is good to use all available credit fairly regularly, even if it’s just for a nanosecond.

It will rarely be correct to close these older credit facilities since they are contributing ‘score juice.’ Equifax Canada states your history can have a 15% weighting on your personal credit score.

These credit facilities can become stale and may not be not pulling their weight on your personal credit history. Update the DLA (date of last activity) with a modest transaction and then pay it online immediately. If it’s a personal line of credit, just transfer $10 to yourself and the next day transfer back $10.50.

If you notice you have credit cards that have not seen daylight for months or years, take them to the supermarket or gas station, use them just once, and pay online right away. After the next statement these cards will report the date of last activity as the current month and year, and that may give you some much-needed points.

5. Scour & Clean All Reporting Errors

There might be some incorrect information in your personal credit history that’s needlessly dragging down your score.

A few examples include:

  • You have two or more personal profiles with the credit bureau and your information is scattered and diffused. Combining it all into one credit report could well increase your score and strengthen your look. (This often happens to people whose name is hard to spell, or who have legally changed their name).
  • Late payments being reported when it’s not you. Maybe you have a relative with the exact same name.
  • That router you returned to the cable company is showing as a collection; but in fact you returned it to the local store.
  • You completed a consumer proposal and all the debts included in the proposal should be reporting zero balances and should not carry an “R9” rating. This generally means an account has been placed for collection or is considered un-collectible.
  • There may be incorrect late payments. Equifax Canada states payment history has a 35% weighting on your personal credit score.

Mortgage brokers can fast track an investigation with Equifax Canada for you. What might take you two months, we can get done in a few days. Keep that in mind if time is of the essence.

improving your financial healthThe Takeaway

This overview is a fairly simplistic way of looking at your personal credit report and highlights initiatives specifically intended to give your credit score a quick boost. These tips are not necessarily the same as when you are managing for optimal credit health or interest-expense minimization.

Ideally, you are working with someone who understands all the nuances and who can help you determine what your priorities should be.

  • https://www.canadianmortgagetrends.com/2020/02/five-tips-increase-credit-score-quickly/

Household debt growth outstripping all other debt types

Credit & Debt DAZADA DIAMOND 29 Jun

Household debt growth outstripping all other debt types

Household debt growth outstripping all other debt typesOver the last few decades, household debt growth accelerated faster than every other debt class, according to real estate information portal Better Dwelling.

Citing data from the Bank of Canada, the analysis said that the trend “makes Canadian households [among] the most vulnerable” globally.

“In 2000, household debt was just 58% of GDP. By the end of 2019 Q4, that number has hit 100% of GDP,” Better Dwelling said. “This is amongst the highest of advanced economies.”

BoC numbers indicated that national household debt hit a peak of $2.28 trillion in March, increasing by 0.44% from February and 4.6% from March 2019. Outstanding mortgages accounted for $1.64 trillion of this sum, rising by 0.49% monthly and 5.3% annually.

The impact on monthly budgets was inevitable: Even before the COVID-19 pandemic took hold, Canada’s insolvency incidence was already at 11,575 filings as of February, which was the highest level since 2010.

The Office of the Superintendent of Bankruptcy Canada said that this volume was 9% higher on an annual basis. Ontario posted the greatest increase during that month, at 3,837 filings (up 16.8% year over year), with Quebec’s 3,770 filings (up 1.9% annually) coming in at a close second.

“[These figures] underscore how vulnerable Canadian households are to income interruption. Over the next few months we’ll likely see an unfolding of two crises: the global pandemic and the bursting of the Canadian consumer debt bubble,” MNP LTD president Grant Bazian said. “Many households were already limited in their ability to face any kind of financial disruption. Now, all Canadians are feeling the effects on their paycheques, pocketbooks and stock portfolios. Those who were already saddled with a lot of debt are in economic survival mode.”

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Mortgage arrears rate could spike to double what it was in 2009, Bank of Canada says

Banks & Bank of Canada DAZADA DIAMOND 3 Jun

Mortgage arrears rate could spike to double what it was in 2009, Bank of Canada says

Central bank says number of people falling behind on mortgages could almost quadruple

Carolyn Wilkins and Stephen Poloz will explain the bank’s views on Canada’s economy at a press conference on Thursday morning. (Blair Gable/Reuters)

Emergency measures to deal with the economic impact of the COVID-19 pandemic are showing encouraging signs of working, but Canada’s economy is still facing an uncertain future, the Bank of Canada says.

Like other policymakers, Canada’s central bank has spent the last two months making a flurry of policy decisions to ease the flow of credit, including slashing its target interest rate and embarking on an unprecedented bond-buying program.

The report suggests these measures have helped ease liquidity strains and provide easy access to short-term credit for companies and households.

“We entered this global health crisis with a strong economy and resilient financial system,” outgoing governor Stephen Poloz said. “This will support the recovery. But we know that debt levels are going to rise, so the right combination of economic policies will be important, too.”

Defaults are coming

One of the issues on the bank’s radar will be the number of people having trouble staying on top of their mortgages.

The bank said that if no new policies had been implemented in response to the unprecedented economic impact of COVID-19, the mortgage arrears rate may have risen to 2.1 per cent of all loans by the end of this year. That means more than one out of every 50 homeowners would be at least three months behind on their payments — almost 10 times the number that were before the COVID-19 crisis.

As it stands, because of some of the policies put in place, the bank says that under the current worst case scenario, the mortgage arrears rate will spike to about 0.8 per cent and remain on a much flatter curve that doesn’t peak until next year, once payment deferral plans offered by the big banks at the outset of this crisis are set to expire.

Currently, the mortgage arrears rate is at slightly more than 0.2 per cent. If the rate peaks to 0.8 per cent, that would be roughly twice as high as its highest point during the financial crisis of 2009.

The bank did caution that those forecasts are assuming the worst case scenario for its stress-test modelling, and far more optimistic scenarios could play out.

“The unprecedented nature of the pandemic .. makes the uncertainty around the results exceptionally high,” the bank said.

We already know about record-setting job losses during the pandemic, but the bank gave some new data regarding just how many people are finding it hard to make ends meet.

By its calculations, the bank says about one out of every five home-owning households in Canada doesn’t currently have enough money to cover two months’ worth of expenses, and almost one third don’t have enough to cover four months’ worth.

Even despite the financial support programs, such as wage subsidies, implemented by the federal government, “some households are likely to fall behind on their loan payments,” the bank said. “This typically appears first in missed credit card and auto loan payments and later in mortgage payments.”

Bank of Canada’s Deputy Governor Carolyn Wilkins says once COVID-19 measures are lifted the housing market should “spring back to life,” but adds it’s uncertain when that will be. 1:52

That’s not just a problem for homeowners, either, Toronto-Dominion Bank economist Brian DePratto says.

“Renters are not immune, as they are more likely to work in industries most affected by COVID-19,” he said. “The longer the income shock, the greater the risk of increased consumer insolvencies.

“Broad-based income support measures can only last so long, making the gradual economic reopening crucial to the health of the Canadian economy’s financial underpinnings.”

  • https://www.cbc.ca/news/business/bank-of-canada-thursday-1.5569391