Gail Johnson writes about why it’s important to review your credit report and what to look for. Originally posted on Yahoo Finance Canada, October 2012.
Canadian credit report basics
Your credit report might not be the most scintillating read, but financial experts say it’s vital to pore over it regularly.
“We definitely recommend people check their credit-bureau file at least once a year,” says Canadian Association of Credit Counselling Services’ CEO Henrietta Ross. “If there’s something incorrect you want to have it fixed right away.”
Even seemingly minor mistakes, such as a wrong address or phone number, could cause problems when it comes to applying for credit.
“If you were buying a car or a home, and the lender finds an outstanding amount owing [on your credit report], you could be denied,” says Julie Jaggernath, education media manager at the Credit Counselling Society. “If you were wanting to remove subjects on a house purchase, that would be very stressful.”
Then there’s the potential to spot identity theft
“If there’s any activity on your credit report that’s not yours, it could be because someone has stolen your information,” notes Jaggernath. “Seniors are especially vulnerable to that.”
Other things to watch out for, according to the Financial Consumer Agency of Canada, include:
•Incorrect date of birth
•Errors in credit-card or loan payments, such as those that were made on time but that are appearing as being late
•Negative information about your status that’s still listed even after the maximum amount of time it’s allowed to stay on your report, such as bankruptcy
•Accounts that you never opened yourself, which could be a sign of identity theft
You have the right to dispute any information on your credit report that’s wrong.
Mistakes should be corrected promptly because they can give lenders the wrong impression. You could be turned down for a credit card or loan application or receive a lower credit score than you should have.
Companies that lend money or issue credit cards, such as banks, credit unions and retailers, send details related to the financial transactions they have with you to Equifax Canada and TransUnion Canada. All that information forms a snapshot of your credit history. It’s important to check both, as they might contain different information.
There are regulations in place to protect your personal information, but a range of organizations and individuals can access your credit history, including cellphone companies, insurance companies, governments, employers and landlords.
Your credit score is a judgment about your financial well-being. It indicates the risk you represent to lenders compared with other consumers.
Equifax and TransUnion use a scale from 300 to 900. The higher your score, the lower the risk for the lender.
“These days, anything below 625 would be an area of concern, in general terms; anything above 750 would be considered a strong score,” Ross says. “People should also know it is possible to improve your credit rating and score through wise use of credit. Keep paying those bills on time; pay in full whenever you can; don’t overextend on your debt; and use credit wisely so you can establish credit history.”
If you have a strong credit score, the Financial Consumer Agency of Canada recommends using it to your advantage when you negotiate interest rates on loans.
Equifax provides a free credit file disclosure via mail. However, this doesn’t include your credit score. To get that, Equifax charges $11.95.
TransUnion offers Canadians a free copy of their “consumer disclosure report” by mail. A credit profile costs $14.95, while a credit score is $7.95.
Jaggernath points out that TransUnion has 22 years of people’s information on file, but only information from the last six years is used to calculate their credit score.
“You want to be checking it for accuracy,” she says. “There’s always the chance of human error.”
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