Protecting Your Credit Score During COVID-19 Pandemic

Jun 2, 2020

Having a good credit score is imperative as your credit score can be a factor in whether or not you are approvable for certain purchases and could affect opportunities. Credit scores are intended to help lenders, creditors and others make fair decisions on whether or not to “take a risk” on someone. The risk might involve giving that person a loan (will they repay it?), offering a credit card (will they make timely payments?) or approving their apartment rental application (will they pay their rent?).

Your credit score summarizes information from your credit reports and is calculated using information like your payment history, the amount of debt you have, and the length of your credit history, hard inquiries and other factors. Moreover, recent activities from your credit history have a greater influence on your credit score than activities from years ago. 

Coming out of the COVID-19 pandemic, protecting or rebuilding your credit score will be an important tool in your financial recovery and strength. For that reason, if you can, pay all your bills on time and by the due date. Your payment history is the most important factor in your credit score.

If that might not be so easy for you right now due to COVID-19 hardship, try to pay what you can and make at least the minimum payments on your credit and utility accounts. A partial or minimum payment is better than late payment or no payment at all. Keep in mind that paying anything less than the minimum balance due is still considered a late payment.

Late payments on credit cards and loans are reported to the credit bureau and added to your credit report at least 30 days after the payment due date. When a late payment is reported to the credit bureaus, it will impact your credit score. Once a late payment goes on your credit report, it will be there for seven years, revealing your mistake to anyone who checks your credit report during that time period.

If you are having difficulties paying your minimum payments, instead of letting your score slip, inform your banks and lenders that you cannot make payments on time right now. Lenders will appreciate that you are giving them notice, they may allow you to delay or reduce payments without affecting your credit score at the same time. Many lending institutions have been offering relief programs and deferral payments to assist people who experience financial difficulties related to COVID-19. If you are charged some additional fees, make sure to understand any fee that may be involved with the relief program offered by your lenders, as well as how interest calculations may be affected. Most of the creditor and lender assistance programs will not have a negative impact on consumers’ credit standing.

If you have a mortgage, check if your mortgage includes an option that allows you to skip a payment, usually once a year, without repercussions for your credit score. You can also speak with your mortgagor to allow you deferral mortgage payment options tailored to your circumstances. 

A significantly overdue cable/internet/phone or utility bills can also lead to negative marks on your credit report. However, utility companies usually offer more flexibility with late payments than other creditors and they do not report to credit bureaus directly. 

Utility companies usually wait several months before turning your overdue balance over to a collections company. At that point, not only do you have to deal with annoying collection calls, but the agency usually reports the information to the credit reporting bureaus, which will likely cause you credit problems.

During the time of uncertainty, monitor your credit report and score. Regularly reviewing your credit report is a good habit to get into, regardless of the circumstances. Reviewing the report will help you understand your credit position, ensure accounts are being reported accurately, and possibly identify inaccurate or incomplete information. 

You have the right to request free credit reports from each of the major credit bureaus. 

You can find information on how to order your credit report from the Financial Consumers Agency of Canada for free on this link: https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/order-credit-report.html.

Has COVID-19 Impacted the Real Estate Market?

Jun 2, 2020

With the COVID-19 virus and many uncertainties nested among us, we are likely going to see many changes in the real estate market as a result in the time to come.

Uncertainty surrounding the long-term effects of COVID-19 has paused real estate activities. The pandemic’s negative impact on business prosperity, job stability, investment portfolios and household income could be reflected in buying power to decline and increased supply over demand on both residential and commercial real estate markets. 

During March and April, demand for residential rental units, whether long term leases or Airbnb, has declined substantially not only due to the physical distancing and travel restrictions but also due to a reduction in income, loss of jobs and uncertainty of job security. Many previously rented Airbnb units have been repurposed for the long-term rentals, which has brought the rental price down.

For those who invested in residential real estate for income, this can be a call for an adjustment. Less rental demand, lower rental price and rent defaults, may find many investors and landlords considering selling their investment properties.

For many who planned to step into the real estate market for the first time, dreams may be fading away. Savings have been diverted from the down payment to cover expenses and for the basic survival, and the ability to qualify for a mortgage could change for some of them. The hope for those will be reduced price of the real estate properties, proportionally smaller down payment and cheaper finance. 

The impact of the COVID-19 on commercial real estate is expected to be more significant.  We are likely to see rising vacancy levels and a decline in property values. With businesses closing temporarily or for good, downsizing their office or retail space, with tenants without a steady source of income to fund their obligations, many small property owners with mortgage obligations will most likely put their properties on the market to sell. 

Even if it seems that COVID-19 has slowed down supply in the real estate market during March and April, it is only due to the impetus of restrictions imposed by the government. However, we may see very soon exactly opposite, a higher supply than demand as many property owners may be forced to sell for the reasons for avoiding mortgage default, paying down debt or even downsizing. As a result, we may see a reduction in the real estate price, some real bargain and a more affordable housing market. 

On the bright side, the low mortgage rates are here to stay for a prolonged time. For the stable real estate investors looking to expand their real estate investment portfolio, the new real estate market conditions will represent an attractive and one of the lifetime opportunities.