Gleanings from a Rent to Own Summit
Last weekend I, along with other members of our professional association, gathered in Kelowna for our annual “Summit.” |
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| That’s an umbrella word for upgrading/learning, dialoguing to become better, having our requisite AGM and socializing among like-minded people from across the country. |
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| And one couldn’t complain about the wine tour that accompanied the gathering, as well. |
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We all came away better equipped to serve the people who deserve their own homes but have issues that prevent them from qualifying for mortgages under the current strict rules. As one who provides credit coaching to our clients, I was especially keen to learn anything new from the credit repair expert we’d brought in to speak to us. I did learn some new things to upgrade my skills and pass along.
Now, since most people don’t really understand the word “credit” as used in the industry, here is a little background. First, what is debt to you, is credit to the banks, and it is not necessarily a bad thing. In fact, unless you’ve turned the notion of credit into a good thing, you won’t be able to qualify for a mortgage.
What the banks are looking for is not how much total debt you have; that means almost nothing.
What they are looking for is how much debt you have in comparison to how much you are capable of servicing (your credit limit), and whether you can show a history of responsibility in handling that debt. If, for example, you have a $1000 credit limit on your credit card and it is sitting at $900, that is very bad, and your credit score will go down. But, if you have $1800 on a card that has a $10,000 limit (after all, you’ve already proven yourself worthy enough to get the limit up that high), that is a very good thing and your credit score will go up (90% vs. 18% subscribed). If you’ve just taken out a $30,000 car loan and barely started paying it off, that will hurt your credit worthiness because it is almost fully subscribed, but if you took out that loan 8 years ago and have already paid it off, it will help your credit worthiness because it shows that you can manage an additional $30,000 of debt. If you have two credit cards, that’s better than having one.
So, to get a mortgage, you must show credit worthiness. And the only way to develop that is by showing responsibility with past debts. If you haven’t had past debts, or if you’ve been irresponsible in paying them, you won’t get a mortgage.
So, here are some of the things I picked up (or were reinforced with) in that presentation:
1. Check your credit reports often.
2. You should, first of all, check to make sure your personal information is correct on your report. If not, you may have multiple reports out there. Multiple reports are very common, and one may present an entirely different picture of your credit situation than the other.
3. The score itself is only a “first approximation” of your credit worthiness; the details following the score are just as important, because it is that information that is used to derive the score. But because there are so many different ways of calculating scores, your score can vary widely, even with the same information. The two main credit bureaus, Equifax and TransUnion, each have multiple scoring algorithms (one for you to see and one for the lender to see, believe it or not), but other entities (like CreditKarma), and even the big banks have their own algorithms to calculate scores using the data from the credit bureaus.
4. You should always check both your Equifax and TransUnion scores and reports. Because it costs your creditors in time and money to report to these agencies, many of them will report to only one or the other (another reason your scores will differ between them). Who knows which one your prospective lender will check when you go for a mortgage, or whether they will check both?
5. The rule of 2-2-2. A minimum of two credit lines (credit cards and loans, but credit cards are key), for a period of at least two years prior, and credit limits of at least $2000 are key to getting a mortgage.
6. Absolutely no late payments for at least twelve months.
7. No collections. Most people aren’t even aware when a “Collection” has been slapped onto them because they are not required to be disclosed, and they are often for bills that are believed to have been long paid off, or for which the client is unaware because they never read the fine print in the contract. Once on the report, no matter how just your cause, it is almost impossible to get them removed. Be responsible with paying all your bills every month, always read the fine print on contracts, and check your credit reports often, to avoid these kinds of surprises. |
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| These are only a few tidbits; I encourage you to call me if you’d like a fuller understanding of your credit-worthiness.Here’s something else I learned at the Summit: Rent 2 Own providers, at least those who are members of CAROP, are a really good bunch of professionals. |
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| They’re focussed on creating win-win-win scenarios for themselves and their clients. They treat rent 2 own as a socially responsible enterprise, not a money grab. If you’ve heard anything bad about rent 2 own, you can be sure it’s not about the kind of people in the Association. |
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| Bottom line: Make sure anyone you deal with in rent 2 own is a member of CAROP. |
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The Canadian Association of Rent to Own Professionals is now national, with most of the top providers in Canada (some very large operators) as members. Yours truly remains on the Board of Directors but, for the first time, the presidency is now held by an Ontarian.Next year’s Summit is scheduled for Niagara Falls.
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Award-winning* Fraser Valley Rent 2 Own is a founding member of the Canadian Association of Rent to Own Professionals (www.CAROP.ca)
* winner of all-star awards, 2012, 2014, 2015 at the Rent 2 Own Summit. |
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| Quote of the Week:I don’t ever think about the roads I didn’t take because I spend too much time thinking what’s ahead. I don’t go backwards. – Kelli O’Hara |
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