Improving your Credit & Maximizing your Borrowing, Part 4

Here are your rights within the Credit Reporting Act:

·         To be aware of what your credit says about you; and a list of everyone who has requested it recently.

·         Before any one is given access to your credit file, he or she must have your written or verbal consent or notify you by mailing you a notice.

·         Your report may only be given to a person seeking information only for the purpose of extending credit or collecting a debt; tenancy inquiry; employment or insurance verification; a direct business requirement.

·         The right to be told by a credit reporting agency the substance and sources of information it collects about you.

·         The right to know the name, address and phone number of the credit reporting agency responsible for preparing the credit file used to deny you credit.

·         If you are denied Credit due to information on your credit file, you are entitled to a free copy of your Credit File if you make a request within 30 days of denial.

·         The right to have investigated within a reasonable amount of time, information that you believe is inaccurate or outdated.

·         The right to have inaccurate information deleted from your credit record if a credit reporting agency’s investigation finds erroneous information.

·         The right to have disputed information on your credit file deleted if the credit reporting agency cannot verify it through investigation.

·         The right to include a brief statement that will become a permanent part of your credit record explaining your side of any dispute that cannot be resolved.

·         The right to have negative credit-related information, such as unpaid debts, judgments, and bankruptcies removed from your credit file after 6 years.

·         The right to sue a credit reporting agency on the condition that it deliberately or negligently violates the law.

There are many things to consider with Credit!  The Credit Bureaus are for profit companies, they are not government organizations.  Always do what you can to pay less interest and maximize your lending.  Sometimes the best time to get credit is when you don’t need it.  If you get a line of credit and don’t use it, you pay nothing until you use it!  Please don’t hesitate to contact us if you are looking for more info in regards to your credit or obtaining credit.

Improving your Credit & Maximizing your Borrowing, Part 3

Here are some useful information you should know about Credit Scores.  I’ve listed the main areas used in calculating your credit score, top ways to improve your credit score and other tidbits you might want to be aware of. 

There are 5 Main Areas used in calculating your credit score:

1.    Your payment history – Have you paid your bills on time regularly

2.     Amounts you owe – Do you owe a lot, are you close to your credit limits?

3.     Length of your credit history – How long have you had credit?

4.     Types of Credit Used – Ie. Consumer debt is not treated as well as lines of credit

5.     Your New Credit – Have you recently gotten new credit?

Here are the top 5 ways you can improve your credit:

1. Pay all bills on time.
2. Keep revolving credit balances low.
3. Limit your credit.
4. Be focused when you go for credit.
5. Manage your credit responsibly and regularly.

Here are some other good things to know about Credit:

·         We live in a credit society, vs. the cash based society of our (grand) parents.

·         Treat Credit as an asset as it can work for you producing your cash flow.

·         It is hard to live in today’s world without credit. (i.e. Rentals / payments / home purchases)

·         Extension of Credit is the banks most important function.

·         You need to monitor your credit regularly, knowing all changes at all times.

·         There are 3 Major Credit Bureaus in Canada: Equifax Canada Inc., Trans Union of Canada Inc. and Northern Credit Bureaus Inc.

·         You are entitled to one free credit report per year.

·         Lenders require you to have at least 4 open L.O.C.’s to show stable history.

·         You should have an overdraft and never bounce any cheques or payments.

Improving your Credit & Maximizing your Borrowing, Part 2

The main thing that every bank or company uses to determine whether or not you can borrow is your Credit Score.  There are other names for the Credit Score, such as FICO Score or beacon score.  They are essentially the same thing.  However, there is more than 1 Credit Bureau they can get a score from.  The main Bureau that everyone uses is Equifax. However, some also use TransUnion or Northern Credit.  You can get a good handle on your credit score by using Equifax. 

One of the first things you need to know about your credit score is that there are soft checks and hard checks on your credit.  When you check your credit, it is a soft check and does not affect your score. However, when an institution or lender checks your credit, it is a hard check and negatively affects your score. So don’t go and just shop around for credit, allowing each potential lender to check your credit as that will bring your score down.  Each time it is checked, it will go down so be cautious on who you authorize to check your credit!

To check your credit, you can simply go to www.equifax.ca and get your credit report.  If they can’t verify you online, you may need to call and rectify. But once you have an account, you can get your credit any time for a small cost.  You can also subscribe to different credit systems where they send you a regular report and notify you if anyone checks your credit.  Although you can get a free credit report in the mail each year it doesn’t have a score, so doesn’t tell you all that you need!

One of the main reasons for checking your own credit, other than knowing where you’re at with your credit score, is to see if there are any errors on your credit.  Many times people find things on their credit report which shouldn’t be there.  Even though they may not be correct, they are still on your credit and could be negatively affecting your score! Errors can be fixed!  Equifax has a form that you can submit and they provide instructions on their website as to what to do when you find errors on your credit report. 

More on Credit Scores on my next post!

Improving your Credit & Maximizing your Borrowing, Part 1

Many people really don’t realize how important their credit actually is.  Your Credit is an asset.  1 bad mark on your credit could costs you thousands of extra dollars in interest on a loan, or 10’s of thousands or even 100’s of thousands of dollars on a mortgage.  Why pay more?  The better your credit the better your rates on loans, mortgages, lines of Credit and more.  Did you know that if you have good credit you can even renegotiate your current interest rates!  Do your best to keep your credit score as high as possible so you can get the best rates and keep more in your pocket!

When you go to borrow money, there are 3 main things that determine how much you can borrow and at what rate.  Here are the 3 areas:

1. Credit Score
2. Debt Service Ratio
3. Your history with the company/bank that you are borrowing from

I will work backwards to cover these 3 areas, starting with your history with the company/bank that you are borrowing from.  Each institution that borrows money keeps great record of your history with them, such as how long you’ve been a client, your payment history, how many loans and other products you use and so forth.  Many companies/banks take this into account when loaning you money.  If you’ve had a great history with them, this will assist you in your borrowing needs if you use that company or bank to borrow money.

Debt Service Ratio is a much more complicated topic. A Debt Service Ratio is a calculation made by a lender to determine if your current income can service your debt(s). Many different lenders require different Debt Service Ratios, so there is no sure way to know that you will pass their Debt Service Ratio unless you ask what it is.  Don’t be afraid to ask as many questions as you can when you are considering borrowing.  Not only do different institutions have different Debt Service Ratios, but each type of lending can have different Debt Service Ratios.  For example borrowing for a vehicle would have a different Debt Service Ratio then borrowing for a home.  Debt Service Ratio is typically calculated by dividing your monthly payments on your current loans and general cost of living items by your gross income.  Again because each company/bank has different Debt Service Ratios, it is best to ask the questions and how they calculate their Debt Service Ratio.  If you can’t meet their debt service ratio, then it may be a waste of time and a mark on your credit when you apply for the credit, so why bother?

We’ll get into our discussion of the Credit Score on my next blog. Please check back!