As mortgage professionals, we feel it is of the utmost importance to inform our customers as to the significance of their credit standing and how it affects their capacity to obtain a mortgage and, even worst, affects the cost of borrowing, especially in these uncertain economic times. Making some of the following mistakes can ensure that lenders will put on a hazmat suit to handle your credit report.


Remember the good old days, way back in 2007, when the streets were paved with Credit-Gold as far as the eye could see and credit cards rained from the sky? Even the creditdestitute were treated like kings by credit card companies and courted with lavish offers of unlimited credit.

Here, in the future, the world has changed. And woe betides those who ask for loans with glaring blemishes on their credit reports. An unpaid collection is apt to be regarded like a cockroach in the consommé.

What affects your credit score and in what proportion?

The Seven Pitfalls to Avoid

1. Close credit card accounts
2. Let credit cards collect dust
3. Run up high balances
4. Apply for new credit repeatedly
5. Don’t pay fine on non-credit-card bills
6. Ignore mistakes on your credit report
7. Make late payments or skip them all together

SO, WHAT TO DO?

1. Close credit card accounts

If you intend to close some credit card accounts, remember that only recently opened accounts should be considered for closing. Length of credit history is an important component of the credit score; therefore, it’s not a good idea to cancel a source that has been long-held since payment history can have positive implications for your credit rating.

2. Do not let credit cards collect dust

It is suggested that people use their cards periodically. Burying cards in the backyard or hoarding them in a shoebox in case of an emergency may also backfire. Consumers encounter two pitfalls if a creditor closes an account for non-use: The available credit is pared down and that account no longer contributes to their credit history.

3. Run up high balances

If using too little credit sends up red flags to lenders, using Loading up on high-interest credit cards isn’t a good idea even if the reward programs are attractive. Lenders want to see people use credit just right -- not too much, not too little.

It can be damaging to cardholders who run up a high balance every month on one card and then pay it off each month. Scoring systems do not take those payments into account. Restrict the amount and sources of your credit. Remember, credit is about a convenient payment method, so make sure it fits your needs. It should never be used as money you don’t have.

5. Don't pay fines on non-credit-card bills

Other business relationships that don't normally report your good payments can turn around and bite you if you decide not to pay as agreed. A lot of service providers don't report positive information. But the minute you do something wrong, they can outsource that debt to a collection agency who will report it.

Even if you never go over the limit on your credit card, being one day late on a bill can affect your credit rating. By the way, experts recommend not spending more than 35 per cent of your allowable credit limit.

6. Ignore mistakes on your report

Say what you will about credit bureaus, they do make it easy to dispute inaccuracies on your credit report. In order to dispute something on a credit report, one must, of course,check one's credit report. It's easier than it's ever been as consumers have unfettered access to their own credit information.

Unlike other issues that affect credit scores, mistakes sometimes can be remedied easily and quickly, so it's worthwhile to keep tabs on your report. By law, credit reporting agencies must provide your Consumer Disclosure report, which differs from the credit report lenders use, if ordered via mail or fax.

7. Make late payments or skip them entirely

It seems almost too obvious, but it bears stating that paying late and missing payments altogether are stellar ways to ensure that your credit score will scrape the bottom of the barrel.

If you experience cash flow problems or a downfall in your family economic situation for some time, don’t hide, it’s the worst thing you can do. Instead, call organizations that have loaned you money. Explain the situation and tell them you want to work out a repayment plan. Remember, always pay something.

The further back in time the mistakes are, the less impact they have on your credit score. Obviously, the fewer mistakes consumers make the better for their score.

We hope this information will prove helpful; should you have any further
questions, do not hesitate to call your Mortgage Specialist; he will be happy to
help you. And remember, you always play safer when you build savings; this is,
without a doubt, the best way to have a good night’s sleep.

Canada's housing industry showed signs of life in February after several months of declines, with resales rising 8.6% from January thanks to lower mortgage rates and prices, the Canadian Real Estate Association reported Monday.

Despite February's gains, sales are still down 31% year over year, as are prices, which have fallen 9.2% in the past 12 months, CREA said.

Still, atotal of 28,669 homes changed hands in February on a seasonally adjusted basis via the industry group's Multiple Listing Service. It is the first month-to-month uptick in home-resale activity since September 2008.

"Typically, the spring market we're moving into generates more activity, and this year there are the benefits from historically low mortgage rates and improved affordability in most markets," said CREA president Calvin Lindberg.

CREA cautioned that listings remain high, although the number is trending lower, with 65,060 units listed for sale in February, down 10.9% from the same month a year ago.

"The housing supply is expected to continue easing, but it will take time before it realigns with lower demand," said CREA chief economist Gregory Klump.

"Economic uncertainty is keeping home buyers in a cautious mood, so homes are taking longer to sell than in recent years. Lower sales activity at the higher end of the price spectrum will keep the national MLS residential average price under downward pressure."

The national average price for home sales via the MLS was $281,972. Canada Mortgage rates, meanwhile, are near historic lows. On Friday, for instance, TD Canada Trust lowered its seven-year fixed mortgage rate by 0.2 points to 6.8%.

CREA said February's 9.2% annualized price decline is smaller than year-over-year drops posted in the past four months and is the first time the pace of decline decelerated since turning negative in July 2008.

"The report does offer some hope that the decline in Canadian home prices may have stabilized somewhat in February after appearing to have accelerated in the latter months of 2008," said TD Securities economics strategist Millan Mulraine.

"Not surprisingly, the biggest decline in prices were in Calgary (down 10.8% year over year), Greater Vancouver (down 13%), and Windsor (down 15.7%). However, prices in Toronto (down 5.4%) were also lower, while prices in Montreal (up 2.2%) and Quebec City (up 9.3%) continue to rise, albeit at a more modest clip," Mr. Mulraine said.

Canadian housing starts fell by a greater-than-expected 12.3 percent in February on declines from the single and multiple dwellings sectors, Canada Mortgage and Housing Corp. said on Monday.

New home construction dropped to a seasonally adjusted annualized rate of 134,600 units from 153,500 units in January, CMHC said.

The number of starts in February was below the consensus expectations of analysts who had called for 145,000 starts.

Urban single family home construction declined 11 percent to 44,500 units last month from 50,000 units in January. New construction of multiple dwellings, such as condos, fell 17.5 percent to an annual rate of 63,300 units.

Rural starts were estimated at a seasonally adjusted annual rate of 26,800 units in February.

The Bank of Canada has cut a key short-term interest rate about as low as it can go in what is becoming a frantic effort to spark recovery from a recession it admits it has misjudged.

The central bank did what virtually every private sector economist advised it to do Tuesday morning, slashing the trend-setting overnight rate to 0.5 per cent into uncharted territory.

But bank governor Mark Carney, who was criticized for being overly rosy in his January economic outlook, now says that even at such unheard-of lows, the stimulus provided by traditional monetary policy is likely not enough.

And he said the bank now sees recovery coming later than it had projected, possibly in early 2010.

‘‘Given the low level of the target for the overnight rate, the bank is refining the approach it would take to provide additional monetary stimulus, if required, through credit and quantitative easing,’’ Carney wrote in a statement.

The central banker does not give examples of specific measures, but BMO deputy chief economist Doug Porter said the bank is considering a process whereby it injects money into the system buy buying up assets such as government bonds, asset-backed commercial paper and even government bonds directly.

‘‘Simply put, the bank is preparing to pull out all the stops to support the economy,’’ he said.

Canada’s major banks appeared ready to play ball with Carney: shortly after the announcement, Royal Bank (TSX:RY), Bank of Montreal (TSX:BMO), TD Bank (TSX:TD) and CIBC (TSX:CM) announced that they would cut their prime rates in step with the central bank.

The reference to non-traditional monetary measures confirms that Carney knows he has exhausted interest rate cuts as a means of stimulating the economy out of a deepening and increasingly stubborn recession.

Darcy Briggs of Bissell Investment Management in Calgary said the bank could trim rates to 0.25 per cent — as the U.S. Federal Reserve has done — but ‘‘practically, what would that do?’’

As former Liberal cabinet minister and economist Doug Peters wrote last week: ‘‘Interest rates that count, such as interbank lending rates, mortgage lending rates, bank commercial lending rates, are all unusually high, especially considering that inflation is also very close to zero.’’

The other surprise was that Carney appeared to back off his relatively rosy forecast for the Canadian economy, which envisioned growth returning in the third quarter of this year and rebounding to 3.8 per cent next year.

‘‘The outlook for the global economy has continued to deteriorate since the bank’s January... update, with weaker-than-expected activity in major economies,’’ Carney said Tuesday.

‘‘National accounts data for the fourth quarter of 2008 and other indicators of aggregate demand point to a sharper decline in Canadian economic activity and a larger output gap through the first half of 2009 than projected in January.’’

Carney said potential delays in stabilizing the global financial system, along with low consumer confidence and larger hit on household wealth, ‘‘could mean that the output gap will not begin to close until early 2010.’’

Tuesday’s statement does not officially alter the forecast, but strongly implies that both this year’s 1.2 per cent contraction will be worse and that the recession may last until next year.

Most economic indicators have come in far weaker since January’s much-criticized bank outlook, including Monday’s report that the Canadian economy has shrunk by 3.4 per cent in the last quarter of 2008, far worse than the bank’s negative 2.3 per cent projections.

As well, Canada lost 129,000 jobs in January, a massive amount, which Carney did not know when he made his forecast.

But possibly the most critical factor is that the global economy, especially among industrialized nations, appears to be in free-fall.

The fourth quarter saw GDP fall by 6.2 per cent in the United States, six per cent in the United Kingdom, 5.7 per cent in the Eurozone, 10.3 per cent in Mexico and a massive 12.7 per cent in Japan.

And far from stabilizing, the U.S. financial system is lurching from crisis to crisis. On Monday, the U.S. government said it was adding another $30 billion to the bail-out package for the giant insurance company American International Group Inc. after it reported a staggering US$61.7-billion in quarterly losses.

‘‘Stabilization of the global financial system remains a precondition for the global and Canadian economic recoveries,’’ Carney noted in his statement.

Carney also forecast that inflation will likely be lower than expected this year.

The Canadian housing market is cooling but is not facing a U. S. style meltdown, builders here say.

"A few commentators have draw an a parallel between the Canadian housing situation and the extreme difficulties in the housing market in the United States," the Canadian Home Builders' Association said in a report yesterday that dismisses such comparisons.

"There is absolutely no merit in drawing such a parallel," the construction lobby said in a report that contends the pace of housing construction in Canada is merely returning to a level that is consistent with underlying housing requirements following the boom of recent years.

"The housing situation in Canada is totally different from that of the U. S.," it said. "There will be some price moderation in some markets, but there is nothing to suggest that housing markets in Canada are vulnerable to the oversupplies and plunging prices that characterize many markets in the U. S.

"We did not experience the same housing boom conditions that occurred in the U. S., and there is no reason to expect that we are in for the serious pain they are currently suffering," it said.

To support its argument that the Canadian housing market is not going the way of the U. S. market, it cited a variety of differences:

-Unlike in the U. S., underwriting standards for qualifying mortgage borrowers in Canada have been maintained at prudent levels resulting in mortgage borrowers here being much more creditworthy.

-Canadian mortgage lenders never offered low initial 'teaser' rate mortgages that led to most of the difficulties for mortgage borrowers in the United States.

-Most mortgages in Canada are held by their original lender, not packaged and sold to third parties as is typical in the United States, and consequently, Canadian mortgage lenders have a vested interest in ensuring that their mortgage borrowers are creditworthy and not likely to default.

The average price of a Canadian home is expected to decline by 8 per cent this year before rising by about 1 per cent in 2010, says a forecast by the Canadian Real Estate Association.

"We are caught in a cycle where consumer confidence has been eroded by job losses, and consumer confidence is an essential ingredient for housing sales activity," CREA president Calvin Lindberg said in a report released yesterday.

The average Canadian home price was $303,594 at the end of 2008, but that should drop to $279,400 by the end of this year before rebounding slightly next year, according to the association that represents realtors in Canada.

Ontario should see prices fall to an average of $279,100, down from $302,354, while British Columbia will see the biggest hit to prices with a fall of 10.9 per cent, followed by Alberta at 8.9 per cent. Newfoundland is predicted to buck the trend, with prices rising by 4.8 per cent this year.

Sales activity is also forecast to fall by 16.9 per cent this year, but realtors are predicting a rebound of 9.9 per cent in 2010, marked by a second-half acceleration based on a recovering economy.

While the forecast is optimistic compared with those of some analysts – who believe the housing market may not recover for several years given the last housing downturn, which saw average prices fall for seven straight years in the Toronto area – the report is in line with other economists who predict the housing market will start to show signs of recovery next year.

"The correction in Canada's housing market continues to unfold and it appears the pace is a bit quicker than we had originally anticipated," Charmaine Buskas, senior economics strategist with TD Securities, said in a note yesterday. "In the face of continued economic weakness, housing may not see a rebound until early 2010."

Canadian housing starts fell 10.9 per cent in January to 153,500 annualized units, the fifth consecutive monthly decline, resulting in the slowest pace of residential construction activity since 2001, according to a separate report by the Canada Mortgage and Housing Corp. yesterday.

"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic said in a note. "With sales activity showing no signs of life, residential construction will be under pressure for most of 2009."

The Toronto Real Estate Board reported 2,670 sales in January compared with 5,075 at the same time last year, a drop of 47 per cent.

The average price was $343,632 – more than $30,000 less than the same time last year.

Meanwhile, a report by Toronto-based Altus Group reiterates fears over the burgeoning condo inventory in the Greater Toronto Area.

According to the housing research firm, 94 new projects were launched in the GTA in 2008, with 55 per cent of units remaining unsold by year's end.

Altus forecasts project cancellations will be more frequent this year as "many projects in the pre-construction stage are far from achieving a sufficient per cent of units sold to obtain financing."

The report says the situation may be less dire than during the housing bubble of the '80s because mortgage rates and investor activity were much higher then.