By: Jenny Cowley, Jeannie Stiglic, Asha Tomlinson · CBC News

Whether through ads or our own experiences dealing with banks and other lenders, Canadians are frequently reminded of the power of a single number, a credit score, in determining their financial options.

That slightly mysterious number can determine whether you’re able to secure a loan and how much extra it will cost to pay it back.

It can be the difference between having a credit card with a manageable interest rate or one that keeps you drowning in debt.

Not surprisingly, many Canadians want to know their score, and there are several web-based services that offer to provide it.

But a Marketplace investigation has found that the same consumer is likely to get significantly different credit scores from different websites — and chances are none of those scores actually matches the one lenders consult when deciding your financial fate.

‘That’s so strange’

We had three Canadians check their credit scores using four different services: Credit Karma and Borrowell, which are both free; and Equifax and TransUnion, which charge about $20 a month for credit monitoring, a plan that includes access to your credit score.

One of the participants was Raman Agarwal, a 58-year-old small business owner from Ottawa, who says he pays his bills on time and has little debt.

Canadian company Borrowell’s site said he had a “below average” credit score of 637. On Credit Karma, his score of 762 was labelled “very good.”

As for the paid sites, Equifax provided a “good” score of 684, while TransUnion said his 686 score was “poor.”

Agarwal was surprised by the inconsistent results.

“That’s so strange, because the scoring should be based on the same principles,” he said. “I don’t know why there’s a confusion like that.”

The other two participants also each received four different scores from the four different services. The largest gap between two scores for the same participant was 125 points.

The free websites, Borrowell and Credit Karma, purchase the scores they provide to consumers from Equifax and TransUnion, respectively, yet all four companies share a different score with a different proprietary name.

Credit scores are calculated based on many factors, including payment history; credit utilization, which is how much of a loan you owe versus how much you have available to you; money owing; how long you’ve been borrowing; and the types of credit you have. But these factors can be weighted differently depending on the credit bureau or lender, resulting in different scores.

So, which credit score is giving Agarwal the clearest picture of his credit standing?

Marketplace learned that none of the scores the four websites provide is necessarily the same as the one lenders are most likely to use when determining Agarwal’s creditworthiness.

We spoke with multiple lenders in the financial, automotive and mortgage sectors, who all said they would not accept any of the scores our participants received from the four websites.

“So, we don’t know what these scores represent,” said Vince Gaetano, principal broker at MonsterMortgage.ca. “They’re not necessarily reliable from my perspective.”

All consumer credit score platforms have small fine-print messages on their sites explaining that lenders might consult a different score from the one provided.

‘Soft’ vs. ‘hard’ credit check

The score that most Canadian lenders use is called a FICO score, previously known as the Beacon score. FICO, which is a U.S. company, sells its score to both Equifax and TransUnion. FICO says 90 per cent of Canadian lenders use it, including major banks.

But Canadian consumers cannot access their FICO score on their own.

To find out his FICO score, Agarwal had to agree to what’s known as a “hard” credit check. That’s where a business runs a credit check as though a customer is applying for a loan.

Lenders are contractually obligated not to share a copy of the report FICO provides with the customer. They can only discuss the information and provide insight.

A hard check comes with risk. Unlike the “soft” check Agarwal agreed to from the four websites, a hard check could negatively impact his credit score.

As Credit Karma’s website explains, “Multiple hard inquiries in a short period could lead lenders and credit card issuers to consider you a higher-risk customer, as it suggests you may be short on cash or getting ready to rack up a lot of debt.”

Mortgage broker Vince Gaetano offered to do a hard credit check for Agarwal, as if he was applying for a loan, so he could learn his FICO score.

Agarwal took him up on the offer and was stunned to learn his FICO score was 829 — nearly 200 points higher than the lowest score he received online.

“Oh my god!” Agarwal said when he heard the news. “I am really happy, but totally surprised.”

Doug Hoyes, co-founder of Hoyes, Michalos and Associates Inc., one of the largest personal insolvency firms in Canada, was also surprised by the disparity between Agarwal’s FICO score and the other scores he’d received.

“How can you be poor somewhere and fantastic somewhere else?”

Marketplace asked all four credit score companies why Agarwal’s FICO score was so different from the ones provided on their sites.

No one could provide a detailed answer. Equifax and TransUnion did say their scores are used by lenders, but they wouldn’t name any, citing proprietary reasons.

Credit Karma declined to comment. However, on its customer service website, it says the credit score it provides to consumers is a “widely used scoring model by lenders.”

‘A complicated system’

The free services, Borrowell and Credit Karma, make money by arranging loan and credit card offers for customers who visit their sites. Borrowell told Marketplace the credit score it provides is used by the company itself to offer loans directly from Borrowell. The company could not confirm whether any of its lending partners also use the score.

“So there are many different types of credit scores in Canada … and they’re calculated very differently,” said Andrew Graham, CEO of Borrowell. “It’s a complicated system, and we’re the first to say that it’s frustrating for consumers. We’re trying to help add transparency to it and help consumers navigate it.”

From Agarwal’s perspective, the credit companies are simply using the scoring system as a marketing tool.

“There should be one score,” he said. “If they are running an algorithm, there should be one score, no matter what you do, how you do it, should not change that score.”

The FICO score is also the most popular score in the U.S. Unlike in Canada, Americans can access their score easily by purchasing it on FICO’s website, or through FICO’s Open Access Program, without any risk of it impacting their credit rating.

FICO told Marketplace it would like to bring the Open Access Program to Canada, but it’s up to Canadian lenders.

“We are open to working with any lender and their credit bureau partner of choice to enable FICO Score access to the lender’s customers,” FICO said in an email.

Hoyes, the insolvency expert, suggests instead of focusing on your credit score, a better approach to monitoring your financial status would be to shift attention to your credit report and ensuring its accuracy.

All four websites Marketplace looked at provide credit reports to consumers.

A credit report is the file that describes your financial situation. It lists bank accounts, credit cards, inquiries from lenders who have requested your report, bankruptcies, student loans, mortgages, whether you pay your credit card bill on time, and other debt.

Hoyes said consumers are trying too hard to have the perfect credit score. The fact is, some activities that could boost a credit score, such as getting a new credit card or taking on a loan, aren’t necessarily the best financial decisions.

“My advice is to focus on what is better for your financial health, not what is best for the lender’s financial health.”

He said paying off debt and increasing savings is a better idea than focusing solely on the factors that can increase your credit score.

He points to billionaire investor Warren Buffett, the third richest person in the world, as an example.

“Would you rather lend to Warren Buffett, who’s got … cash in the bank but has a lousy credit score because he’s never borrowed and hasn’t built up any history, or some guy who has five credit cards and he constantly … moves the balance from one to the other and keeps his utilization under 20 per cent?”

The real estate, mortgage and auto lenders Marketplace spoke with said they look at more than just your credit score before making a lending decision. They also consider things like your income, your history with their company, the size of a downpayment, and other factors not reflected in your score.

For Hoyes, those factors are much more important than a three-digit number.

“You focusing on this one metric, that isn’t the same thing the lender is using anyways, is really pointless, and I think it leads to bad decisions.”

The good news, according to Borrowell CEO Andrew Graham, is that if you’re doing things like paying your bills on time and not maxing out your credit cards, you will see improvement in whatever credit score you track.

“I think that’s the power here.”

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by Aaron Broverman

Andre Kutyan always has an ear to the ground.

The Harvey Kalles sales representative has been an agent for 15 years. In 2017, Kutyan was contacted by the The Globe and Mail and asked how he was able to get multiple offers on a home in mid-town Toronto. This was after the introduction of the Ontario Fair Housing Plan, when he had been the Canadian media’s go-to real estate prognosticator. Now, he’s been quoted in the Globe and Mail and the Toronto Star multiple times.

Since Kutyan always makes it his business to know what’s going on in Toronto’s housing market and tell the public about it, he seemed like a natural fit for this week’s question.

What is the three-to-five-year outlook for real estate sales in Toronto and the GTA? What are the top 5 trends?

It really depends what type of real estate you’re looking at. Are we talking about detached homes, condominiums, townhomes or semi-detached and what area of the city are you looking at? My answer is going to vary depending on what I’m looking at.

Ultimately, I think the long-term outlook for any real estate sales in the city is going to be upward. We’re in a growing metropolis that looks more and more attractive on the world stage considering what’s going on with our neighbours to the south and what’s happening with the UK and Brexit. On the world stage, Canada and Toronto specifically are very attractive. Ontario brings in 110,000 permanent residents per year and most of them move into the GTA, so in the next seven or eight years we’ll have another million people living in Toronto.

Now, not all these people are buying one million, two million or three million dollar homes, but it puts upward pressure on demand so if supply is limited then it’s a simple math equation where prices will go up.

In the short-term, we’re going to see some fluctuation and that depends on the type of property and the location. There’s a real shortage in mid-town Toronto for properties between $800,000 and $1.2 million where I’ll get multiple offers. I’ll get four to five thousand hits on the listing in five to seven days. I’ll have two hundred plus people through in a week and I’ll end up with ten or twelve offers with property selling for significantly over my asking price.

But then in certain areas of the city, like Bayview, York Mills and Willowdale, there’s a lot of inventory on the market. If I look in Bayview and York Mills at prices between three to six million dollars for detached two-storey homes on 50 to 70-foot lots, there are 86 homes on the market right now. If I look at the number of homes that have sold over the course of six months and divide by the number of months it comes out to 2.83 sales per month, which means there is almost 31 months worth of inventory still on the market in those areas.

Most of the price growth in Toronto has been in condominiums because the majority of the buyers are not in the million plus range, so if you look at the $500,000 to $800,000, that’s where most of the buyers are. What can you buy at that price point? It’s going to be condos. There have been price increases on those for sure.  As for trends, here are my main ones:

Shortage of large condos

The other flip side I’m seeing with the condo market is the high-end or the larger units have real lack of inventory in central Toronto.

What’s happening is there’s a big cohort of baby boomers who are looking to downsize, but there’s no one to sell them to. There are only a handful of buildings in Toronto that have fairly large units and they’re few and far between. I’m seeing multiple offers and big prices I haven’t seen before on these units because of the demand.

The problem is the homes they’re selling have gone down in price, while the condos they want to buy have gone up.

Boomers staying in homes longer creates housing shortage for millennial buyers

The gap is widening between what they’re leaving and what they’re looking to buy, so what’s happening is a lot of these people are holding on to their homes longer than they should.

Their house may be under used for their needs, but unless they have to move due to health they’re not going anywhere, which creates a housing shortage in certain areas for millennial buyers.

More long-term renters

As a result, young buyers will have to change their outlook on what home ownership is going to be for them. There’s the age old rent versus own conversation. This generation is used to living in freehold homes within the city, but that may change.

People might look at renting more now and if you look at Canada in general, we have one of the highest percentage home ownership rates in the western world, but it’s something ingrained in our mentality to be home owners. But this might change. People may shift to being permanent renters and focus on putting the rest of their money elsewhere.

Buyers owning homes outside Toronto means increased dependency on public transit

If people are going to own something, they’re going to have to change what their view of that is going to be.

We’re all used to growing up in freehold homes in suburban Toronto or within Toronto, but since income has not kept up with the way pricing has gone, if people want to live in the city, it’s not going to be in a freehold house it’s going to be in a condo or some kind of multi-residential home like a duplex or townhome.

If they want to live in a house, they will have to live in the suburbs and when I say suburbs, I’m not talking about Scarborough and Etobicoke. I’m talking about Oshawa, Ajax, Burlington, Hamilton and Barrie. They’re going to use GO Transit and other forms of public transit to commute into the city and work at even greater numbers than they already do.

Laneway housing

The city has allowed for laneway housing now and I think that’s going to be something we’re going to see more and more of moving forward. There are hundreds of kilometres of unused laneways in Toronto, so why not use them?

There are companies here in Toronto that are specifically geared towards building and getting approval for laneway housing. What you’re going to see is either someone is going to put in a laneway home to augment their income or subsidize their mortgage or because they need more space.

Perhaps they need a studio space, an apartment for a parent they need to take care of or a space for an adult child to live at home. This is going to be a big trend and I have clients now who are specifically only looking for houses on lanes. These are investor clients who are looking to do something.

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By: Sean MacKay

Overvalued, overbuilt, overheated — all of these terms have been used to describe the potential danger that the Canadian housing market has found itself in at various points over the last few years.

But even as many said with certainty that the worst was still to come for the market, it turned a corner earlier this year and has been on a path to moderation ever since.

And that’s where we find the market again this week as the Canada Mortgage and Housing Corporation (CMHC) releases its not particularly thrilling but actually very important and comprehensive Housing Market Assessment for the fourth quarter of 2019.

The CMHC’s quarterly assessment of Canada’s overall housing health as well as its constituent parts (ie. markets in major urban centres) has again found what it calls a “moderate degree of vulnerability” in the market. This marks the third consecutive quarter that the CMHC has given Canadian housing the moderate label following 10 straight quarters of sounding the alarm over what it saw as a “high degree of vulnerability” in the market.

The CMHC, a Crown Corporation that handles all things housing for the federal government, evaluates the market using a framework that considers evidence of four housing risk factors — overheating, price acceleration, overvaluation and overbuilding — to provide an overall assessment for the national market as well as 15 major markets across the country. To develop its assessment, the CMHC looks at the intensity of each risk factor and the persistence of the market imbalances. So essentially, how bad are they and how long are they expected to be that bad?

While the summer and fall seasons have seen some major markets register noteworthy recoveries in sales and prices, the Canada-wide average home price is still in decline and price acceleration is low. Meantime, the population of young adults entering prime home-buying age is growing, leading to an expanded pool of potential buyers. The CMHC points to this as evidence that the ever-important housing market fundamentals — which also include population and wage growth in many urban centres — are catching up to the once-runaway home prices.

All this makes for much tamer conditions than what was reported in 2017, for instance, when the CMHC was seeing many bright red risk factors across several major housing hubs amounting to a highly vulnerable Canadian market.

Now only Victoria has the unlucky designation of being a “highly vulnerable” market with the CMHC noting that the west coast city has moderate evidence of price acceleration and overvaluation, which is enough to earn it a red flag overall. Thankfully, the CMHC says these risk factors appear to be easing so it’s possible that Victoria will be downgraded next quarter.

Toronto, which earned the highly vulnerable distinction just last quarter, was downgraded in the fourth quarter with housing overvaluation easing and evidence of overbuilding found to be low by the CMHC.

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By: Jeremiah Rodriguez, CTVNews.ca Writer

Canada’s booming cannabis industry has led to a spike in housing prices and home shortages in some regions, according to a new report from RE/MAX.

For example, Smiths Falls, Ont. — home to Canopy Growth, which Bloomberg dubbed the largest cannabis producer in the world — now employs 1,300 people.

An unintended consequence of that employment growth is a shortage of available homes.

RE/MAX states the surrounding Rideau-St. Lawrence region is in the midst of a housing shortage because of high demand. Home sales rose by 27.1 per cent year-over-year with average prices going up by 10.5 per cent.

“I think the real story is that the cannabis industry is creating jobs and demand in the (housing) market,” Christopher Alexander, RE/MAX executive vice-president of the Ontario and Atlantic region told CTVNews.ca in a phone interview.

But Smiths Falls is simply part of a larger boom. The report explains that “this trend is more pronounced in Eastern Canada, where there’s a greater number of large-scale cannabis producers.”

Atlantic Canada, where these new operations have been setting up, has been experiencing an “economic renaissance,” the real estate company said.

In communities like Wentworth, N.S. — which houses the Breathing Green Solutions facility — new and active listings are down and months of inventory dropped from 45 in 2018 to nine in 2019, according to the Nova Scotia Association of Realtors.

The city’s September home sales have jumped exponentially year-over-year. One province over, in Atholville, N.B., which is home to Zenabis Global Inc.’s 420-person operation, the real estate market is similarly seeing a boom.

BIG PRODUCERS HAVE BIGGEST EFFECT ON REAL ESTATE

But RE/MAX is seeing similar spikes in other markets further west such as Ontario’s Windsor-Essex area, where cannabis producer Aphia has set up a 1,000-employee facility in Leamington, Ont.

In this case, September home sales spiked by nearly 8 per cent with average prices rising 9.10 per cent.

All that being said, Alexander noted the direct effects of the cannabis industry on real estate are not yet fully known.

“It’s still early because the industry is still in its infancy,” he said, explaining that when growth companies set up shop in small communities like Smiths Falls and Leamington, there’s a direct correlation to job creation and home sales.

“Whenever there’s job creation … it creates more demand in the marketplace and more often than not, (home) prices will start to rise,” Alexander said.

The report stated that while Western Canada doesn’t boast the same number of large-scale producers as Eastern Canada, the Prairies are seeing a “much heavier influx of cannabis retailers.”

Alberta — which leans more heavily on private retailers — has become a real estate hot spot in part because of the cannabis industry — despite Canadians’ initial resistance to pot shops, RE/MAX said.

Calgary alone boasts 50 cannabis storefronts which dwarfs Greater Vancouver’s 23 pot shops or Toronto’s six legal shops.

HOMEBUYERS BUY NEAR POT SHOPS, DESPITE SUPPOSED OBJECTIONS

A recent RE/MAX consumer survey found that 65 per cent of Canadians said they didn’t want to live near a cannabis store. But Alexander says there’s a discrepancy between what prospective homebuyers say they want and what they end up doing.

According to a 2019 poll of RE/MAX brokers, one in five Canadians live near a cannabis store and 72 per cent of people surveyed said living near one ultimately wasn’t a factor in deciding to move.

“Consumers are funny in that regard,” Alexander said. When you take into account the shortage of available homes in Canada over the past five years, being next to a pot shop is “the last thing on people’s minds.”

On the other hand, 25 per cent of homeowners said they would actually move if a cannabis store opened up in their neighbourhood, with 44 per cent saying they’d like to live near a pot shop.

Although real estate is largely cyclical, Alexander didn’t expect demand for homes nor home prices to go down anytime soon.

He expected the “natural progression” of the current trend to be people looking outside of the cities where producers have set up shop to find cheaper homes.

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by Duffie Osental

More Canadians are starting to feel the pressure of debt obligations such as mortgage payments.

The latest MNP Consumer Debt Index revealed that over half (54%) of Canadians said that they are more concerned about their ability to repay their debts than they used to be – which isn’t very surprising given that the average Canadian, after paying bills and debt obligations, is left with only $557 at the end of each month.

What’s more, three in 10 (29%) have said that they already don’t make enough money to cover all their bills and debt obligations each month. And seven in 10 said that they are not confident in their ability to cope with life-changing events – such as a divorce, unexpected auto repairs, loss of employment or the death of a family member – without increasing their debt.

Grant Bazian, president of MNP LTD, said that the data indicates increasingly less wiggle room in household budgets.

“Many Canadians don’t have enough to cover all their expenses let alone put anything away for rainy day savings,” said Bazian. “The reason this is alarming is because it is often unexpected expenses that force people to take on more debt they can’t afford and that begins a cycle of increasing servicing costs, and eventual default.”

Bazian advised consumers to have at least three to six months of expenses saved in case of emergencies. He also said that a professional help may be needed to draw up a debt payment plan.

“Whether you’re saddled with credit card debt, line of credit, a mortgage, a car loan, or all of the above, now is the time to be paying it down,” said Bazian. “If you feel like your debt is out of control, get professional help to help design a debt relief strategy. Beyond taking on more debt to deal with debt, the single biggest mistake people make is waiting too long to seek help.”

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