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Credit Scoring

Recently I read a great article by Kathryn Boothby, Postmedia News (http://business.financialpost.com/2013/03/26/how-to-get-the-best-deal-on-your-mortgage/?__lsa=64f2-5713 )

In this article a spokesperson for the FCAC (Financial Consumer Agency of Canada) said to do your homework and get your credit report.  “Getting a credit report six months ahead of time allows you to check for errors or other items that need addressing so that you can improve your credit score before applying for a mortgage,” she says.

A credit report provides a summary of credit history including bill payment and debt repayment with credit providers such as banks and retail stores.  It also shows records that may affect creditworthiness such as court judgments, bankruptcies or liens.  FCAC provides information about how to obtain free credit reports and the steps that can be taken to improve credit scores.

This is great in theory but this fall we ran into a problem.  We had a client go to Equifax.ca and pay to check their credit, the score was 670, they had been working really hard to make sure their credit was good.  When we checked it as part of the mortgage application we got a 585 score, let me tell you we were surprised.

I ask my compliance officer to ask Equifax about it and this is the answer we got.  “Essentially there are different scoring models available. Within those models there are also different versions.   In many cases the scores will have vary minimally (70% within 40 points).   Although a large variation is rarer, these instances are not unheard of between scores.

What does this mean in english ? – basically I think there should be a huge disclaimer from Equifax saying your score may not be what it appears to be.  We cannot check a credit score unless they are ready to move ahead on the file, the client spends the money to check and they get a good score and then we pull it and it is could be 40 points lower – that is the difference between getting a mortgage or not or getting a rate of 2.89% or 4.5%

This is a huge issue with the consumer and it needs to be dealt with.

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