Week 13: Your Credit Report
MONEY SMART CAMPAIGN
Money Smart Weekly Conversation Fact: Building a good Credit Report is important for your financial health. You can obtain a copy of your Credit Report, free of charge by mail, to find out what your credit history looks like to potential lenders.
The Financial Consumer Agency of Canada reinforces that knowing what is in your Credit Report is important.
Along with millions of other Canadians, you have a credit history that is kept on file by companies called credit reporting agencies. They track how you use credit products, such as credit cards and loans, and pay your bills. This information is used to create your credit report and credit score. These are some of the main tools lenders use when they decide whether they will lend you money and how much they will charge you to borrow it. Employers and landlords may also use credit reports to get a sense of your reliability.
Errors on your Credit Report or a damaging credit report could be keeping you from realizing your financial dreams.
If you have a poor credit history, it could be harder for you to get a credit card or a loan. You could have to pay more to borrow money. It could even aﬀect your ability to get a Student Loan, rent housing or get hired for a job. You can also use your credit report to check for signs of identity theft.
You have the right to see your own credit report. And there are ways you can get it for free.
Some Questions and Answers about Credit Reports
Question: There are 2 credit bureau agencies in Canada, Equifax Canada and TransUnion Canada, that monitor debt, provide credit reports, and give us a credit rating. Where do they get their information and who has access to it?
Answer: Most financial institutions report to credit bureaus and in the case of collections of a bad debt write off, even utilities or phone companies report to credit bureaus.
In terms of access, any company that is able to do a credit application for you can access your credit bureau report with your consent. You can also access it yourself by contacting Equifax Canada or TransUnion Canada directly.
Transunion calls their credit reports Consumer Disclosures. Simply download and complete the Consumer Request form from https://www.transunion.ca You have the right to obtain a copy of your Consumer Disclosure, free of charge by mail or in person. You can also access your credit report and score online through Transunion but it will cost you a fee each month.
Equifax Canada also supplies a free credit report through the mail which you can download from http://www.consumer.equifax.ca/home/en_ca Complete the form and mail it in to receive a free Credit Report. If you want to also obtain your credit score, it will cost you a fee. You can also access your credit report and score online through Equifax Canada but it will cost you a fee each month.
As soon as your receive your Credit Report, check all of the information to make sure it is correct and if you find errors, arrange to make corrections immediately.
For more information on how to read your credit report, download this document from the Financial Consumer Agency of Canada.
Question: How do banks and other potential lenders use credit ratings to make decisions?
Answer: Banks and other lenders receive a financial credit report that shows them your repayment history, collections, bad debt, write offs, total amount of each liability and payment amount, when it originally started and if it is still active.
Lenders also base their decisions on whether to loan you money or not based on the 4 Cs:
Character: Your repayment history, time at your current address, amount of money already owed, and recent inquiries on your credit file.
Capacity: Length of time at current job, gross income per year, self employed or not, and ability to repay loan.
Collateral: Rent or own your home, money in investments/savings, other assets and the value of assets.
Contribution: How much you put down and the payment schedule.
Question: How can I protect my credit rating and buying power?
Pay all of your debts on time and in full.
For loans that allow extra payments, make extra payments when you can.
Borrow only what you can afford and decide if your amortization is realistic. Consider and plan for changes in income when applying for long term loans.
Avoid any unnecessary inquiries into your credit report.
If you plan on applying for a mortgage, car loan or any significant form of credit within the next 12 months, you should avoid any other credit applications within that period. Recent applications for new credit makes up 10% of your credit score, so you should avoid any unnecessary inquiries into your credit report. Any time you authorize a creditor to check your credit, an inquiry is added to your report which lowers your score. If you have a large amount of inquiries in a short amount of time, creditors may infer that you are either applying for too much credit because of financial difficulties or taking on more debt than you can handle. It’s important to note that regardless of whether you’re credit application is approved or not, the credit inquiry will still be recorded on your report. Therefore, do not apply for credit that you know is beyond your means. It’s also important to note that requesting your own credit report does not count as an inquiry into your credit profile, so feel free to request it as often as you want. (Taken from Here’s how you can save money by improving your credit score by Christopher Ordolis on www.cbc.ca)
Protect yourself from identity theft and fraud. Review your credit report on a regular basis. Use discretion when sharing personal information such as your Social Security number, PIN numbers, phone numbers, driver’s license number, date of birth, bank account number, Health Care number, and credit card number. Do not give personal information to people who phone or email you and ask for it. No reputable bank or business will call or email you for personal information. Shred all paper you receive with personal information on it before throwing it in the garbage.
Question: If my credit rating has been negatively affected by debt, how can I improve it?
Answer: Perfect repayment of cell phone every month will improve credit.
Apply for a secured credit card and make regular payment to build back your credit.
Apply for a small limit retail credit card and make regular payments.
Pay off any collections.
If you cannot pay your credit card off in full, ensure that you at least make the minimum payment on time each month.
START the MONEY SMART CHALLENGE TODAY by ANSWERING this QUESTION:
Money Smart Week 13 Question: Have you ever ordered your Credit Report? Will you be ordering it now that you know how important it is?
Now, What Do I do?