It’s easy to damage your credit rating. And often, Canadians don’t even realize it is happening, until it is too late.
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Most of us aren’t aware when our credit rating is being impacted and when items are being sent to the credit bureaus.
Credit impacts everything—from buying a mobile phone to qualifying for a mortgage to buy a home, and everything in between.
Let’s look at four areas of credit that we all need to be aware of:
One of the things that impact your score is ‘credit seeking’. This is when you apply for a number of credit products in a short space of time.
Most of us understand that applying for credit has an impact on your credit score. What isn’t always evident is when the credit check is happening.
You may get a ‘pre-approved’ credit card offer in the mail – this doesn’t mean you are actually approved and that no credit check is required. You may have met one small criteria as part of a larger approval process such as you may have other credit or you have a job or even just be over 18 years of age. In order to get approved, they will still pull a credit check.
You may be online comparing credit card options and submit a couple of inquiries—this can trigger a credit report. It is important to read the small print before you send in the inquiry or application. Even if you don’t actually move forward with the card if you are offered it, it will still show as a credit application.
A number of credit applications in a short period can be viewed by a lender as a warning sign that you’re facing financial challenges. Try to limit the credit applications to a minimum and only apply if you truly need the credit.
There really is no excuse for not doing this, other than not knowing how.
Luckily it’s fairly simple and it’s free. Each credit reporting agency must provide you with a free credit report annually. This is the bare minimum that you should be checking your reports.
You can go online to Equifax and Transunion and print the forms for your free credit report.
https://www.consumer.equifax.ca/personal/education/credit-report/how-to-get-a-free-credit-report/
This won’t give you your credit score, but will allow you to check the report and ensure everything is reporting correctly.
The process of obtaining free credit reports is fairly simple, just ensure you are requesting your free report, not signing up for a free credit monitoring trail.
Credit monitoring can also be a great option but comes at a monthly fee.
Each month you will be notified of any changes to your credit report and be able to obtain either daily, monthly or quarterly updated credit scores and reports depending on which package you sign up for.
Your credit report is only as accurate as the data provided to them. The data is provided by all those reporting to the credit bureaus.
If data is entered incorrectly and sent to the bureau it can then report incorrectly on your credit report.
If you consider the potential number of individuals with the same name as you in Canada and the number of entries and updates the credit reporting agencies are dealing with, it should help you understand how mistakes can happen.
<strong>There is no central database with which the credit bureaus cross reference their information. In fact, not all credit granters report to the same bureaus, nor do they all use the same bureaus when evaluating your creditworthiness. </strong>
There are two credit reporting bodies in Canada:
It is possible that you could have good credit with one and not the other.
You may be in default with a lender that only reports to Equifax and this doesn’t appear on your Transunion report.
Most of the large lenders now report to both, but some of the smaller lenders find it cost prohibitive to report to both and pull both reports.
Following are some of the main factors for things to report incorrectly on your credit report.
Address
When you complete a credit application your personal information is sent to the credit reporting agencies. This is one of the ways it gets updated, but if your application is with a lender that only reports to one bureau and no other activity triggers a change with the other bureau, then there will be a disconnect.
Payment history
It is possible to have a bad debt reporting on your history despite all payments having been made, but somehow an error has occurred internally with the lender.
It’s even possible you have a debt reporting that isn’t yours.
Credit reporting agencies have a legal obligation to ensure that your credit report is accurate and that if there is an error, they must ensure that changes are made in a timely manner.
You will need to follow the dispute process and will need to provide confirmation that the change you are requesting is accurate.
In some cases, the credit reporting agency may need to contact the credit grantor to confirm if it is related to payment history or specific account information.
Remember, you can’t ‘correct’ something that is accurate. Just because you don’t want it reporting (ie if you have a bad debt in collections), you can’t change it just because it is negatively impacting your credit if you owe the money.
Once the change is requested you will receive a response from the credit reporting agency and, if changes have been made, an updated copy of your credit report. If your requested changes aren’t made, they will notify you as to why.
Whatever your financial situation, your credit score plays a critical part in your being able to obtain credit, therefore you need to be aware of what can impact this and commit to checking your reports.
There is nothing worse than thinking everything is great with your credit report, only to find out it isn’t when you apply for credit. If items are reporting incorrectly, this can significantly slow the process as you go through the steps required to correct it.
Too often, it’s only when credit applications are denied that we are made aware that something isn’t as it should be.
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