How to Calculate Your Credit Score for Free

In the last few years, your credit rating has become increasingly important. While it seems obvious that your credit report and credit score are used in making decisions about loans, there are other less obvious uses for your credit history. Others might use your credit information to make decisions about other financial services and products. Poor credit could lead to you paying hundreds, or even thousands, of dollars more over your lifetime.

Understanding your credit, and knowing your credit score, can help you learn more about what’s at stake, and help you improve your financial situation. However, it’s not always straightforward to get an idea of where you stand with your credit.

When it comes to checking your credit reports, it might be worth paying for your credit report to get your credit score. This is because, while you are entitled to a free credit report, you aren’t entitled to a free credit score. While your free credit report can give you an idea of what you look like financially, on paper, it’s not the same as seeing the credit score that lenders will use to determine whether or not they will approve your loan. Your credit score is a quick look for others; they make snap judgments about your level of financial responsibility using your credit score. It might not be fair, but it is the reality of our financial system right now.

However, it you aren’t planning to apply for credit anytime in the immediate future, you might not need your exact credit score to keep tabs on your general financial progress. If you’re not too worried about an exact number and would like to have a general idea of your credit score, there is a way to calculate this for free.

How to Calculate Your Free Credit Score

It’s actually fairly easy to see where you stand when it comes to your credit score. All you need to do is visit this credit score estimator and fill in the fields. Once you have done that, the calculator will tell you what range your score falls into. This can provide you with a starting point for improving your finances. If you are considered to have “Fair” credit, you can make it a goal to move up into the “Good” category. If you are in the “Good” category, knowing your estimated score can provide you with a starting point to take you into the “Excellent” category.

The score estimator works by asking you for information that indicates where you fall in terms of the factors that the official credit scoring algorithm works. Factors such as payment history, amount of debt you have, the types of accounts you have, how many credit inquiries are on your report, and the length of your credit history are weighted differently and used to come up with your credit score.

The calculator can’t be perfect, since the exact scoring algorithm is proprietary. But using the information that has been made public about the way some of the factors are weighted, it’s possible to come pretty close. In fact, I found this calculator to be quite accurate when I compared the results with my own credit information.

I have three different reports that I’ve paid for to get my credit score over the last five years. Two were from Equifax and one was from TransUnion. I answered the questions using the information in these reports and not only did the calculator get the range right, all three times the score on the reports came within 10 points of the middle of the calculated range for that report. That’s not bad at all!

While you may have all the needed information handy and could check your score at any time, I recommend ordering your free credit reports and using that information with the calculator. You can order your free credit report, use the exact information provided by the report to ensure maximum accuracy, and then write the score the estimator gives you on the report for your records.

If you plan to apply for credit, it’s best to pay for your “official” credit score. However, if you are just keeping tabs on your financial progress, Bankrate’s free credit score estimator is a great resource that you can use for your own information.

Written by: Tom Drake, Canadian Finance Blog

Posted by: Steven Porter, Mortgage Agent - Mortgage Architects

How can I protect myself from mortgage fraud?

To avoid unknowingly taking part in a mortgage fraud, be suspicious if you are:

• asked to say that you make more money than you really do
• asked to lie about whether you will live in a property or rent it out
• asked to sign documents that have blanks, or asked not to fill out certain sections of a form or document
• offered a fee for the use of your name and credit information
• discouraged from visiting the property, or having it appraised or inspected 

If a registered real estate professional commits mortgage fraud, The Real Estate Council of Ontario (RECO) can take away their registration or prosecute them.

See RECO’s website for more information on mortgage fraud.

Don't Rely on Listing Details

Listing details should be double checked

Visit and confirm home’s specifics before the deal closes

As a buyer, how do I know the information from the online listing is accurate? If it isn’t, is there anything I can do about it?


Chances are. the first time you glimpse your dream home will be while you’re flipping through the real estate section of your local paper or scrolling through online listings. Regardless of how you find it, the listing information and accompanying photos or videos play an important role in landing the property on your short list and ultimately helping to determine if it’s a property you want to see.


A typical listing may include a broad range of the property’s attributes, including the number of bedrooms and bathrooms, the sizes of those rooms, the age of the home, the size of the lot, the age of the building’s main components (for example, the roof, furnace and air conditioning, etc.) and other useful information for buyers.


If the seller is working with a real estate agent, the agent is generally accountable for the accuracy of information contained in both the listing and any other information they share with buyers. That means they are expected to take steps to confirm the seller’s claims about renovations, square footage, municipal taxes and any other information that appears in a listing. As a registered real estate professional, they are required to be fair and honest with anyone involved in a transaction and use their best efforts to prevent error.


You may see some listings that note the information provided is “to be verified by the buyer.” It’s important to understand that sentence doesn’t release the listing representative from his or her accountability for accurate details. However, you or your salesperson should be pro-active role in double-checking the information you have about the property.


As a buyer, it’s in your best interest to do your own research before making an offer, or during a conditional period. The best way to verify the seller’s claims on the condition of the home is to have the property inspected by a qualified home inspector, engineer or contractor. Hand them a copy of the listing; it will help them to have some information to work with and they’ll be in a better position to confirm the property’s details are what you expect.


Your real estate agent can also help by including conditions in your offer that allow you to verify what is important to you (for example, that all knob and tube wiring has been removed or that the property is zoned as a multi-unit dwelling, allowing the buyer to install a basement apartment).


The Agreement of Purchase and Sale may also be drafted to allow you to return to the property once or twice before closing; take advantage of these opportunities and dust off the measuring tape to confirm room sizes. Go and look around, and check the other details about the home before you move in.


The impact of inaccurate information can be significant depending upon the attribute in question and the importance of that attribute to the buyer. If you find an inaccuracy in the listing after your offer has been accepted, seek the advice of your real estate professional and lawyer. They may be able to work with the seller’s representatives on some price adjustment or other remediation. If not, it may become a matter for the courts.


While RECO can’t get involved in civil proceedings, if you have serious concerns about the accuracy of listing information, consider filing a complaint with us. You can find the complaint form on our website at reco.on.ca.


Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to askjoe@reco.on.ca . Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps .

Steven Porter ABR, Broker - RE/MAX Aboutowne Realty Corp. For experience that counts when buying a home contact Accredited Buyer Representative.

Should cash-strapped retired homeowners eye HELOCs or reverse mortgages?

 You’re a senior citizen and you don’t have enough income to live comfortably. What do you do?

It’s an all-too-common question, especially with more than half of Canadians carrying debt into retirement. If you own a home with sufficient equity, and you want to keep living in it, two increasingly popular options are a home equity line of credit (HELOC) and a reverse mortgage.

Although both give retirees access to cash, there are significant differences between the two: reverse mortgages are straightforward while HELOCs in retirement are not.
If you borrow modestly and with discipline, however, a HELOC can be the best way to bail you out of a retirement cash jam.

The Home Equity Line of Credit (HELOC)
HELOCs are revolving credit lines offered by banks,brokers and other lenders that let seniors borrow against their homes in small or large increments. They typically require only monthly interest payments, no principal. So if you took out $100,000, you’d pay $292 a month in interest, using current rates of 3.50 per cent.

HELOCs, unlike reverse mortgages, do not require monthly principle payments. However, you can make lump-sum payments whenever you want.

The Reverse Mortgage
HomEquity Bank’s “Canadian Home Income Plan” (CHIP) is Canada’s only widely available reverse mortgage. The bank lends anywhere from 20 to 50 per cent of a home’s value, depending on the applicant’s age, location, existing secured financing and property type.

Last month, HomEquity Bank rolled the “Income Advantage,” which has notable improvements over the traditional reverse mortgage: Most importantly, the rate is lower. If you make pre-set withdraws each month, you’ll pay just prime rate + 1.25 per cent (4.25 per cent today). That compares to rates of prime + 6.00 per cent in 2009.

Other improvements include lower fees, the ability to take smaller monthly advances instead of big lump sums (which rack up unnecessary interest), the option of locking in variable-rate borrowing, and no rate surcharges on existing customers who renew.

Which is better?
To get a HELOC you have to qualify. The lender will check your credit, verify your income and analyze your debt obligations.

With a reverse mortgage, if you’re 55 or over with sufficient equity and a marketable house, you generally qualify. And you never have to make a single payment, even if you live in your home past 100.

Where HELOCs have appeal is with interest savings and flexibility. They’re roughly ¾ of a percentage point cheaper than the Income Advantage plan, based on current rates. That’s over $3,500 of interest savings over five years on $100,000.

But HELOCs aren’t without risk. The death of a spouse, new lending regulations, changes in a bank’s credit policies or increases in capital costs could all cause a bank to restrict a senior’s HELOC borrowing. Additionally, rising interest rates or excess borrowing could potentially hike monthly payments, making them unaffordable for a cash-strapped retiree.

Another consideration is that seniors needing additional cash flow may use the HELOC itself to make the interest payments. The concern there is the bank getting worried when it sees steadily rising debt with no principal payments.

But Louis-François Poirier, National Bank’s mortgage product manager, says this alone is generally not enough for his bank to restrict a senior’s HELOC, as long as the customer is paying as agreed. “We encourage the customer to make principal payments, but our credit agreement clearly states that the only amount expected monthly is the interest.”

One Possible Strategy
For some retirees, the interest savings of a HELOC is worth the tradeoffs versus a reverse mortgage.
If times get tough and the senior can no longer afford the HELOC payments, or runs out of borrowing room, they can usually refinance the HELOC into a reverse mortgage.

But this requires caution. You never want to borrow more from your HELOC than what HomEquity will lend you. “I would want to ensure that if I was taking that risk, that the client was borrowing no more than 80 per cent of what they would qualify for at the time with us,” says Jeff Spencer, vice-president of national sales at HomEquity Bank.

If you do use a HELOC to supplement retirement income, it’s vital to have an experienced independent financial or mortgage adviser do the math to set an appropriate HELOC limit – one that factors in your age, possible interest rate increases, potential property value declines, and so on.
Retirees should also be mindful of interest rate risk. “Personally, I think it’s a good analysis to test one’s monthly budget with a 200 or even a 300 basis point increase to their contractual (interest) rate,” says Mr. Poirier. A three-percentage point hike would inflate a $292 monthly interest payment (on a $100,000 HELOC) to $542.

Yet another thing to remember is that unforeseen factors can reduce your future ability to refinance. Those risks include a fall in your property value, reductions in maximum lending limits and increases in life expectancy. The Income Advantage eliminates those worries and, to some, that’s worth the 0.75 percentage point rate premium over a HELOC.

“For most retirees that have a retirement plan running out to the age of 90, I don’t think the annual saving of interest is worth the extra risk that their property declines significantly, or loan-to-value calculations change at our firm, or they don’t stay disciplined and use more of the [HELOC] than intended,” HomEquity Bank’s Mr. Spencer adds.

Borrowing your way through retirement
Mr. Poirier says a small but growing percentage of seniors are supplementing retirement cash flow with a HELOC. The same holds true for reverse mortgages.

But while it’s possible to use a HELOC as a “security cushion or emergency fund,” he is first to admit that “for seniors, day-to-day expenses should ideally be covered by retirement savings, as opposed to borrowing.”

Unfortunately, that won’t be a reality for up to one-third of Canadians who rely on their home equity to survive retirement. For many of those folks, the HELOC vs. reverse mortgage debate is one they’re sure to encounter.

By Robert McLister

Home inspection . . . A team approach

It may be difficult for a home inspector to detect issues behind any walls or under floors and only certain specialists may be qualified detect certain flaws in furnaces and fireplaces. In rural properties, it is common to have separate inspections for a home, well and septic systems, as these elements require certain expertise to properly inspect and advise potential buyers.

Expertise in these areas include a fireplace inspection by a qualified wood energy technology transfer (WETT) professional once a year. This is a real safety issue as an improperly working fireplace can cause a fire in your home. Furnaces and HVAC systems should be checked once each year for similar reasons. This not only ensures that your equipment is operating safely, but informs you so you may be able to make changes to your equipment that will make your system operate more efficiently, saving you money in the long term.

Sellers should consider such a pre-inspection prior to putting their home up for sale, to demonstrate to potential buyers that the systems are operating safely.

Mold is becoming an even larger issue especially after flooding and sewage backups. The good news is that there are now companies that can inspect for moisture within wall cavities, with sophisticated infra-red equipment.

When you are about to make one of the largest purchase decisions of your life, it is important to have as much information that you need in advance. A home inspection team may supply the answer.