Credit ratings – are you making the grade?
We all have a credit score – a number between 300 and 900 used to help judge our financial reliability.
Yet, few Canadians know their credit rating, understand how it’s created or know how to change it.
Equifax Canada and TransUnion Canada track every credit movement. Anyone who issues credit and loans feeds these two agencies the information that forms your credit history.
A good credit rating will help you secure loans and lower the interest rates you’re charged.
They know what about me?
Canadians should regularly contact Equifax and TransUnion for a free copy of their credit report (they may charge fees for expedited service and to get your score). Credit reports will show if anyone has applied for a loan under your name. If you find an error, you can request a correction from the reporting agency and from the lender. If you’re still dissatisfied, you’re entitled to add a brief “consumer statement” (or your side of a story).
A credit report includes basic personal information, like date of birth, current/former addresses, social insurance number, driver’s license number and both current and past employers. The credit history lists your loans, bank accounts, credit cards and any other credit, including telecom bills. Late payments, liens, bankruptcy judgments, debt sent to collection agencies and repossessions are all included.
Tips to score well
- Pay your bills on time, ideally in full but always the minimum.
- If you cannot make a loan payment, work with the lender to find a solution.
- Don’t max out your credit. Regularly going beyond half of your credit card and personal lines of credit limits suggests you may have a spending problem.
- Don’t apply for too many credit cards and loans. If you are shopping for a car loan or mortgage, do it in a short period of time, so those inquiries into your credit history are lumped together.
- Read your banking and utilities statements carefully.
- Stability matters so keep credit accounts open – even if they’re not used much.
- When applying for a big loan or mortgage, consider decreasing your credit card limits. A lender will consider unused credit a liability.
Rebuilding credit takes time
It’s possible to turn your credit rating around. Black marks (including bankruptcy) take up to seven years to be removed from your credit history. Bankruptcy judgments can be renewed for up to 10 years.
There are ways to start turning things around:
- Apply for a secured credit card. Give the bank $1,000 and ask them to issue you a card with a $500 or $1,000 limit.
- Ask a relative with a strong credit score to add you to their approved user list on their credit card.
- Ask a relative to co-sign for your credit card or loan.
- Close credit cards or lines of credit you’re no longer using so they’re not part of your credit history review.