The number in your app is a starting point

Most people check their credit score in a banking app or a free credit site, see a decent number, and assume they’re set. That number is useful, but it’s often not the one a lender looks at.

Canada has two credit bureaus, Equifax and TransUnion. Scores run from 300 to 900, and each bureau can show a different score depending on which lenders report to it and which scoring model is used. The score in your app may come from one bureau and one model, while your lender pulls a full report that may come from the other. It’s common for the two to be a few points apart, and sometimes a lot more than that.

So a “good” score in an app tells you you’re probably in decent shape. It doesn’t tell you what a lender will see.

What a lender looks at besides the score

When I pull a credit report for a mortgage, the score is only the first thing I look at. The details behind it matter just as much:

• Payment history. Late payments, especially recent ones, matter more than almost anything else.
• How much of your limits you’re using. A card sitting near its limit can drag your score down, even if you pay it in full every month.
• Recent inquiries and new accounts. A run of new credit in the months before you apply raises questions.
• Collections. The classic surprise is an old phone, internet or utility bill from a previous address that went to collections without the person ever knowing.
• Joint and co-signed accounts. If you co-signed a car loan or a line of credit for a family member, that debt is yours on paper, and it counts in your numbers.

None of these are unusual, and most can be fixed. They’re much easier to deal with when you find them early.

Timing matters more than most people think

Two timing details catch people out.

Card balances are usually reported on your statement date, not your due date. If you run $8,000 through a card each month and pay it off in full on the due date, the bureau may still see a high balance, because it was reported before you paid. If you’re preparing to apply, paying the balance down before the statement date lowers the utilization the bureau sees.

Don’t take on new credit between pre-approval and closing. A new car loan, phone financing or a store card to furnish the new place can change the numbers your approval was based on. Lenders can check your credit again before funding. Talk to me before you sign for anything, even if it seems small.

Shopping for a mortgage won’t wreck your score

A common worry is that every lender who looks at your credit will knock points off your score. That’s not how it works for mortgages.

According to Equifax, when you shop for a mortgage within a short window, multiple mortgage inquiries are generally treated as a single inquiry. That window is usually between 14 and 45 days, depending on the scoring model. Working with a broker also helps, because I pull your credit once and use that report with the lenders I approach for you.

So don’t let the fear of inquiries stop you from comparing options. Just do your shopping within a focused period.

Where the lines are

Score requirements vary by lender and by type of mortgage, but one line is worth knowing. For an insured mortgage (less than 20% down), plan on at least one borrower having a credit score of 680 or higher. That’s the level most lenders want to see before your file gets their full range of options.

Higher scores generally give you access to more lenders and more options. Below the usual thresholds, you’re not out of the picture, but the route changes. Alternative lenders are the usual option, and those mortgages typically come with different terms and costs. Knowing where you stand ahead of time tells us which route we’re on before you fall in love with a house.

Errors take time to fix

Credit reports have mistakes more often than you’d expect: an account that isn’t yours, a paid debt still showing as owing, a late payment that wasn’t late.

You can request your credit report from both Equifax and TransUnion for free. Check both, because one may show something the other doesn’t. If you find an error, you can dispute it with the bureau directly, but corrections aren’t instant. Getting a disputed item investigated and updated can take weeks.

That’s the main reason to check your credit months before you start shopping, not the week you write an offer. By then, there’s no time left to fix anything.

A simple checklist

If you’re planning to buy, renew with a new lender, or refinance in the next year:

1. Get your free reports from both Equifax and TransUnion.
2. Look for collections, accounts you don’t recognize and late payments that look wrong.
3. Dispute any errors now.
4. Keep card balances well under their limits, and pay them down before the statement date.
5. Hold off on new credit until your mortgage has funded.
6. If you co-signed for someone, make sure that account is being paid on time.

The takeaway

Your credit report decides more than your rate. It can decide which lenders will look at your file at all. A 20-minute check today can save you from a surprise in the middle of an offer.

If you’d like me to review your credit with you before you start shopping, I’m happy to walk you through it.

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