Sunday, November 26, 2017

Use Your Free Credit Report to Invest with Confidence

Lender's Point of View

Think of your credit report as your financial resume and references. Lenders and mortgage professionals look at your credit history and credit rating as an indication of your ability to meet your current debt obligations and borrow new funds.

Unfortunately, there are many situations when borrowers default on their loans. Understandably, lenders have to evaluate the risk before lending you some of their money for your deals. This is why lender evaluation of your credit report is an essential part of your credit application review.

As an investor, you have to do your best to maintain trustworthy image with solid financial reputation.

For Your Own Good

Credit rating and report are super helpful for your personal good. Let me explain.

As I grow my investing portfolio on the way to my 50 doors goal, I have to be careful about the risk of over leverage. Over leverage means that I've put myself at risk of going down because I can't pay interest on the money I borrowed to grow my portfolio. If I borrow too much, I will not reach my goal and most likely will have to start over.

Luckily, I don't have to re-invent the wheel every time. Credit bureaus have the tools for me to do my self-assessment. I know how risky / trustworthy I look in the eyes of lenders based on my credit rating and my score trending down or up.

If I have a low score or my score is trending down, I know that I should slow down, stop borrowing, and fine tune my investing strategy in order to avoid the risk of over-leveraging. And vice versa, when my credit rating is high and trending up, I can speed up, look for new great opportunities, finance them and grow my portfolio with little over-leverage risk.

Two Free Ways To Check Your Credit Rating

1) Mogo

I use Mogo app on my phone to check my credit rating. The app sends me a monthly nudge when my credit rating is updated. I login to take a look at the trend of my credit score going up or down over time. Then, I think back on what changes might have happened over the last couple of months that affected my credit rating and plan my next steps to improve my future score. Mogo is super easy to sign up for and it's free. It takes 2 seconds a month to keep an eye on your credit score.  

2) Royal Bank of Canada

If you are a RBC customer, login to your online banking account and click on "View Your Credit Score" in the right-hand side menu under "My Services". This will take you to your TransUnion credit rating dashboard, full credit report with all the details and credit education tab with lots of info on how to read your report. Study all three sections carefully to get a good understanding of your current credit report and rating. Plan how you can improve your score in the future. Re-visit this report every several months to stay on top of your financial resume.

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PS I hope you find this blog post helpful. If you have a question or comment, please don't hesitate to post it below.

PPS I had my first comment ever on one of my previous blog posts about Our First Rental Income Property. This was super exciting and I can't wait to see more feedback! 

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