Talking to your client about Damaged Credit

September 6, 2022

Buying a home can feel like a scary process for some. In all the hustle and bustle of the housing market, brokers need to remember to take a step back and empathize with their clients. This means having difficult conversations.

You may feel your questions to your clients are intrusive or confrontational. You are careful not to offend your clients by asking tough questions that could make them defensive. The reality is that this is the exact information you need to get the best possible deal for your client.

Questions to Ask:

What caused the bankruptcy/consumer proposal?

Bankruptcy is a very difficult experience and it is usually the end result of an arduous period in someone’s life. The circumstances leading to this outcome are important to know because it allows you to provide the lender with the details and determine whether those same problems are likely to reoccur.

Why did they change jobs so often?

Frequent job changes could be a sign of your client taking advantage of better opportunities. It can also be a sign that they cannot hold a job.

Understanding the reasons for job changes and knowing how long the periods of unemployment were between them is a key part of you better understanding your client’s current and future income sources.

Why are they behind on credit card/loan/cell phone payments?

Was it forgetfulness? Is there a dispute with the credit provider? Is this a shared or co-signed account?  Or perhaps this is an early indication of larger financial problem that is just beginning to surface…

It’s best to ask for an explanation for all trade lines that are currently R2, R3 or worse. Don’t ignore past arrears. 

Just because everything is current today does not eliminate the need to explain what happened in the past. You need to know if this is reoccurring or simply a blip.

What is the status of their legal separation/divorce?

You need to understand your client’s legal marital status because if they recently separated or divorced, they may be required to provide additional documentation. For example, they may be asked to provide a separation agreement or seek independent legal advice.

It’s important to know up front what you are dealing with and the level of cooperation that a separated applicant is expecting from their ex. Non-cooperative ex-partners may derail a mortgage application.