Missed a cell phone payment? Forget low mortgage rate!

Getting a mortgage is about more than just how much money you’ve saved for your downpayment or providing proof of income. Don’t forget that a good credit score is one of the most important criteria while applying for a mortgage.

Just the same as with your credit cards and car loans, your cell phone provider will also report to credit reporting agencies about your payment history with them. Paying your phone bill may be much more important than one would imagine. Your phone company will report every late or partial payment to the credit bureaus. Cell phone accounts work a bit differently from credit cards or other lines of credit. 

A cell phone account is an open or “O” account. You would ask what an open account is? The payment is different every month, and it’s usually due in full at the end of each billing cycle, unlike credit cards with minimum payment options. This cycle continues as long as the consumer has an account with the service provider.

Most individuals are unaware that paying their phone bill in full and within the time frame is equally important as other payments. People end up having delinquencies on their accounts and potentially end up being sent to collection agencies, bringing down their credit score. Many Canadians don’t see their phone bills as a priority in bill payments. 

What does this mean when it comes to applying for a mortgage? It can mean good or bad news, depending on if the client has been paying or neglecting their monthly phone bills. Lenders will question you based on your payment history that if you’re unable to keep up with your mobile account charge, what is the likelihood that you’re going to be accountable for your mortgage payment. Missing or having just a few late payments can severely impact getting the best-rate mortgage as you can get declined. There are instances where the lender can deny clients at the last minute due to missing a payment on their bill and reflecting in their credit bureau report. One little hiccup in your phone payment is something that can hinder your chances of getting better rates and longer terms.

If you are disputing with the cell phone provider company for unjust charges, you may be skipping your payments until the matter is resolved. Unfortunately, even if you are unfairly charged and deny the fee, it won’t prevent the negative charge item from turning up on the credit report. Remember that one late payment might be enough to impact your credit negatively. If an overdue balance remains unpaid for 60-90 days, the phone company can start the collection process. Once the collection process has started, your credit rating takes a much harder hit.

If you find yourself in this situation and concerned about getting a mortgage, please reach out to one of our experienced mortgage brokers. It can take some time to get back on track, but it should not mean putting off the purchase of a home.

Dominion Lending Centres NasaKasa

Dominion Lending Centres NasaKasa can undoubtedly help you create a plan to repair your credit to help you qualify with the best rates. You can reach us at 905.997.7001 or email us at mtg@nasakasa.com today to begin your pre-approval process.