July 02, 2015

Do your future self a favour

JULY 2, 2015

If you’re a regular reader of this blog, there’s a very good chance that you’re a self employed musician who could very well burst out into song at any given moment (sorry folks, that just what we do.)

When we go out into our professional world we know how it works; what our engagers want to hear at the audition and see on our resumé. We do our best to make sure we look like we know what we’re doing in person and on paper to ensure that we GET. THE. GIG. A typical (singer) resumé might include a mash up of any (or more) of these genres:

• Opera Rep = I can sing very loud and move around, with feeling
• Orchestral Rep = I can sing very loud and stand very still
• Recital Rep = I like will memorize ALL OF THE (many, many) WORDS
• Cabaret Rep = drinking and singing
• New Music = lots of counting and humming intervals
• Music Theatre = I can secretly (sort of) belt like ‘Barbra’

Voila! Your ticket to the big stage all nicely compressed into an 8 x 11 pdf.

But what about your FINANCIAL RESUMÉ?

When was the last time you checked to see how you were doing on THAT piece of paper?



Most of us have no clue (including my pre-house buying self) what a credit score IS and how it may HELP or HINDER your financial future. Nor do we really see how our money HABITS in our 20s and early 30s effect our financial OPTIONS in our late 30s and 40s.

In a nutshell: It’s a number between 300-900 that reveals your financial personality.

It helps lenders decide whether or not you will be a financial risk, preventing them from retrieving the money owed. You could be the nicest person in the world with a great income, but if your credit score indicates that your financial personality is naughty, no money for you.

A typical credit score: Most lenders want to see a score of 650-680 at the least or there will be “conditions” which come at a cost to you, one way or another. You’ll be happy to know, however, that the majority of my artists have been in the hiiiiiiigh 700s or 800s and had no clue that they were so amazing. As a result - if their incomes were not as high as the lender would have liked, “exceptions” could be made in their favour because their financial personalities showed no risk. See what I’m getting at?

Good money habits can make up for a smaller income.

I’ve spoken to more than one client who would like to go back to scold their younger self for SCREWING UP the decades to follow because the reality is: things change, people change and, to make it work in your favour, only the best HABITS will give you the most OPTIONS when you need them.

So! Let’s look at what’s included on your FINANCIAL RESUMÉ:

• Payment History = 35% shows all of your spending/re-paying habits - good and bad

• Utilization = 30% how much you use the the credit (cards, loans, products) - how they revolve - the owed balance vs. payment

• Length of Credit History = 15% the amount of time since you opened and/or closed an account - the longer a trade line has been well maintained, the higher the score.

• Credit Mix = 10% number and types of accounts (store card vs. student loan)

• Inquiry Segment = 10% Volume/type of recent inquiries for loans. Retail inquiries (store credit cards) lower scores more than inquiries for mortgages or cars.

Unlike your work resumé, you’re not in charge of what you can, and cannot include on your credit report.

The credit bureau lists everything and, in turn, reveals that information to whomever has some form of financing that YOU WANT or NEED. This isn’t limited to mortgages. Landlords can pull your credit score, car loans, credit cards, phone companies....you get the picture.

So, what can you do to make sure that your credit score is in good shape for when your financial life comes knocking at your door?

• Pay EVERYTHING on time. Even if it’s only a minimum payment.

• Avoid carrying a balance on your credit card. Tricky, I know, especially when you’re self employed. But! If you can pay it off every month or do your very best to pay more than the minimum (on time) until you can manage the full balance, that positive effort will work in your favour.

• Make sure you have at least ONE credit card. I recently met someone who has only used pre-paid credit cards for the last 10 years. As a result this person doesn’t have any debt, BUT, they don’t have a credit score to speak of either. Catch 22. You need at least one credit card but, typically, they want to see at least 2 trade lines (credit card, car loan, line of credit, phone bill, etc..) in your credit history and they want to see how you dealt with that responsibility.

• Pay off debt before you apply for more. Rule of thumb: if you can’t pay off the first debt, re-think your choice to apply for more.

I’m not telling you anything that you haven’t heard before, but I hope this blog lets you know WHY it’s so important to make sure your FINANCIAL RESUMÉ looks just as good as your the resumé that makes you the money in the first place.

Thanks for reading!

note: all opinions expressed on this blog are

solely my own and do not express the opinions or

views of Mortgage Brokers City.