Understanding Your Credit Report
Karen Fritz, AMP, is one of my favourite Mortgage Brokers in the area. She is also the owner of the Centum Alternative Mortgages Ltd. office in Collingwood.
She recently gave a presentation to a group of business people about credit ratings that I found most interesting. Sometimes I have clients that have a challenging time getting mortgages for the best rates and terms possible due to poor credit history and rating. Here is some of her advice from that session about understanding your credit report.
Q. How do I get a free copy of my Equifax Canada credit file?
A. Call 1-800-465-7166 or visit www.equifax.ca
Q. How do I correct errors on my Equifax credit file?
A. By mail or by fax. Visit website for details.
Q. Information in my Credit Report
A. There are two major reporting agencies in Canada. Equifax and TransUnion store and maintain credit information about individual Canadian consumers for use by members of the credit reporting agency (ie/ banks, finance companies, leasing companies, credit card companies, retailers, etc). They also store information such as public records from courthouses and collection agencies.
Q. What is a Credit Score?
A. A credit score is a statistical formula that translates personal information from your credit report and other sources into a three-digit score. 300-900 with the higher score being better. It is important to reiterate that the credit score is only one criterion that a lender will use in making decisions. For example, in mortgage lending, the lender will take into account the property being purchased and the homeowner’s equity/assets.
Q. Balance Discrepancy?
A. The date that creditor report to Equifax is not always the same date that your last statement was created. The balance on your report reflects the balance as of the date the creditor reported to Equifax – which may or may not be the same date your statement was created.
Q. What are the common negative credit score reasons?
A. Serious late payments/ Collections/ Public Record files (FRO and Bankruptcy etc)/ Ratio of balances to credit limits on revolving credit is too high/ length of time accounts have been established is too short/ too many accounts with balances.
Q. How do lenders view my score?
A. Your credit score is an important indicator of your creditworthiness: The higher your score, the lower the probability that you will become delinquent on credit extended to you. While lenders use bureau scores to help them make lending decisions – each lender will base its decision on more than just the score.
Q. Does my score stay the same?
A. Because your credit report is updated every day – your bureau score is recalculated continuously. Your credit score from a month ago is probably not the same score today.
Q. What can I do to improve my credit worthiness?
A. It takes time and there is no quick fix for eliminating past aspects of your credit history. Pay all of your bills on time all of the time. Try to keep balances below 75% of your available credit. Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can be interpreted as a sign that you are having financial difficulties, or overextending yourself, or being declined along the way. A flurry of inquiries will prompt lenders to ask you why.