Are you making over $75,000 a year with no debts, but are having a hard time getting approved for a mortgage? Well, you are not alone.
Meet 23 year old Robin Bourbeau. He has an annual salary of $80,000 with no debts. He wants to put a down payment of 20 per cent on a $400,000 home but was rejected by his mortgage broker. Even though he is well off in terms of financial stability, he is still considered a “beacon reject” by credit rating company such as Equifax and TransUnion. What does that mean? Simply, a beacon reject is someone with no credit history.
Despite his high paying career and being absolutely free from debt, his problem was that he didn’t realize the importance of building his credit. With no debt re-payment history, lenders just couldn’t trust him with mortgage debt.
Importance of Debt
In Canada, and much of the world, having no credit history will automatically get you denied for a mortgage. Lenders want to see that you’ve been borrowing and repaying debts on time before they feel secured in loaning you a house. Without a credit history, they just don’t know what to expect of you and that puts them at a higher risk and distrust.
Having no credit history will automatically get you denied for a mortgage
David Larock, a Toronto-based mortgage broker, have noticed an increase with millennials who don’t have a credit history. “It’s a bit like trying to get car insurance,” he said. “It’s better to be someone who has been driving for 10 years and had two car accidents, than someone who passed the G2 (driving test) and hasn’t been driving since.”
Ultimately, lenders feel more at ease when knowing that you have a track record of repayment, and definitely more comfortable if you have demonstrated that you are a responsible borrower.
Start Building Credit
There are several ways you can start building your credit today. One of the faster route is to get a car loan. If you are looking to build credit, but also need a car to drive to school or work can apply with Canada Auto. We have a guarantee approval program that will not only help you get started on building your credit today, but also allow you to drive home in your new vehicle.