When planning to buy a home, it is a natural instinct to
want to shop around for the best mortgage. The challenge is that too much shopping
around for the best Ontario mortgages can actually harm your credit.
When purchasing a home you may approach your bank for
mortgage financing. Even when applying for a pre-approval, they will ask for
permission to obtain a credit report. Your realtor may also offer to get you a
competitive mortgage pre-approval and they will also ask for permission to
obtain your credit report. You may even decide to research mortgage interest
rates and deals online and may choose to apply to another financial institution
and at that time you will have to consent to having your credit report
accessed.
When you provide consent to a financial institution, they
will access your credit report on Equifax, Trans Union or both. Each time a
financial institution accesses your credit report, an inquiry is reported to
your credit report.
Inquiries directly affect your credit score. Too many
inquiries will make it appear to a perspective lender as though you are a
credit seeker or perhaps are having a credit problem. The problem is that the
financial institution will only see the date and the name of the financial
institution on the inquiry. They will not know what type of credit you applied
for. If a financial institution sees several inquiries in one month, Royal Bank,
BMO, TD Canada Trust and CIBC for example, for all they know, you have applied
for credit cards. Should you be approved for unsecured credit by all of the
companies who have requested inquiries, then you may be in a position to go
into more debt than what your credit report reflects on the date that a lender
requests your credit report.
The less inquiries you have on your credit report at the
time you apply for an Ontario mortgage pre-approval, the better. Fewer
inquiries are a sign of stability to a perspective lender and indicate that you
are not a credit seeker. Too much shopping around for the best mortgage can
actually harm your credit and your ability to get a mortgage altogether.
Generally, the credit score will be impacted based on the
number of credit inquiries in the past 12 months. Usually any more than 4
inquiries in a 12 month period are considered a lot and will begin to impact
your credit score. You can find out how many inquiries have been made to your
credit report by requesting your credit report from Equifax and/or Trans union.
Equifax’s data is most important because more lenders rely on Equifax data than
Trans union.
One way to reduce the number of inquiries to your credit
report when shopping around for the best Ontario mortgage is to deal with a
Mortgage Broker. A good Mortgage Broker will work with all of the banks and
will pull your credit report a single time, then submitting it to the banks to
obtain a competitive mortgage pre-approval for you. Mortgage Brokers are also
often paid by the banks, so in many cases you will not have to pay them a fee.
For more information about Ontario mortgage pre-approval and
about how too much shopping around for the best Ontario mortgage can harm your
credit please visit www.gtamortgagematters.com
or call Paul Mangion at 416-204-0156
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