Credit History Scores
Any time you apply for financing, whether it be a Mortgage, vehicle finance or perhaps a line of credit at a department store, your credit history will be checked and your score evaluated. Financial institutions that are in the business of lending money use credit scores as their primary source of risk evaluation. A high credit rating is therefore of utmost importance if you wish to gain credit. Credit ‘Lenders’ consider credit history the most accurate indicator of a ‘Borrower’s’ willingness and ability to repay debt. Your credit score is linked to your S.I.N (Social Insurance Number) and as a general rule of thumb your credit score is based on the following factors:
- Length of Credit History (Having No credit history is considered more risky than a few missed payments)
- Number of Credit facilities currently active
- Employment History
- Ratio of Total Credit Facility to Current Balance Owed
- Number, Frequency and Severity of Missed or Default Payments
- Number of enquiries
- Records of Civil Litigation
Here are some simple tips to establishing and maintaining a high credit score:
- With no Credit History your best way of establishing one is to open a “Secured Credit Card”, make a few purchases and pay the balance off.
- Never miss a payment; it will affect your credit score for at least 5 years. (If an error has been made by the lending Institution then ensure that it is rectified and demand a letter explaining how an error was made!!!)
- Ensure you have only 3 facilities open and your balance on each is below 75% of the available limit.
- If you have closed a credit facility or paid off a loan, ensure the lending institution has removed it from your credit report.
- Since your score is adversely affected by the number of enquiries you have on your report, when shopping around for finance, the use of a broker is highly recommended. Brokers who are specialists in their respective fields are able to pull one credit report and utilize the information in applications to multiple ‘Lenders’. If you approached every ‘Lender’ individually it would result in multiple enquiries on your credit report and ultimately affect your ability to borrow.
- Whenever you receive mail containing the words “Low Introductory Rate”, tear it up and throw it away! Don’t fall into the credit trap that has resulted in the consumer credit level reaching a staggering $1.6 Billion, accumulating interest as high as 28% p.a.
Credit Report Agencies
As already explained, a credit history will be used to obtain a mortgage or when buying a car or when renting an apartment or house.
Some companies that provide this service are listed below:
Trans Union of Canada Inc
Consumer Relations Centre
P.O. Box 338, LCD 1
905 – 525-0262
A consumer can buy a report online at Trans Union for CAD$14.99. This company provides two reports; a basic report for CAD$14.50 and a deluxe report for CA$21,50 (shows the consumer how to correct a score over time). The score is developed by Fair Isaac & CO (FICO) and the scores range between 300 and 900, with the higher score showing a better rating than a lower score. The average Canadian score is about 770.
Jean Talon Station
This company provides two reports; a basic report for CAD$14.50 and a deluxe report for CA$21.50 (shows the consumer how to correct a score over time). The score is developed by Fair Isaac & CO (FICO) and the scores range between 300 and 900, with the higher score showing a better rating than a lower score. The average Canadian score is about 770.
Consumers have the right
Immigrants should also remember as consumers they have the right to access their credit information.
Risk of checking too often
To check once a year is okay, but to check more is risky as some lenders might be concerned about why a certain consumer is checking his/her credit history so many times a year..
Sometimes the credit information held on consumers is incorrect. It is not uncommon for people to be flagged with accounts they do not even have. A consumer can correct these errors – but the onus rests on the consumer to check this out and have it corrected. Immigrants are advised to always keep record of all their communications with credit reporting agencies and should not expect any errors to be corrected unless it is in writing.