Let’s talk about scores. If you like sports, you know that the score of a game determines who wins and who loses. As sport imitates life, one of the things you definitely want to do is control the variables as much as you can. You don’t want to be down by 2 in the 3rd period of hockey, you want to be in the lead and able to protect your advantage. In your life there is a score attached to you that dictates a very similar outcome similar to winning and losing a game, which many people do not take seriously enough. I’m sure that you have already guessed what score I am talking about...your credit score. A superior credit score allows you to garner more money, secure better rates and negotiate more favorable terms and conditions. Conversely, a poor score leaves you very few options and you are at the mercy of a lending system that punishes those perceived as higher risk players.
In Canada, all of your credit information is collected and held by two organizations. Equifax and Trans Union are the two companies that manage the data and hold your very precious credit score in their hands. This score is extremely important to lenders and it dictates how you will be treated. Are you the shining example of a winning team that the banks can rely upon to make your payments or have you lost a few games and are deemed to be slightly less viable for the playoffs?
Here is how your score works. Every time you have a credit obligation such as a loan, credit card or retail card of any sort where credit has been extended to you, your progress is tracked. When you make your payments on time, you build yourself a good score. If you miss a payment and the party who has extended credit to you reports it, your score is degraded. Specifically, credit scores range from 300-850, with 723 being the median. Scores below 600 are considered high risk borrowers, 620 being the dividing line between good and bad, 640 or above being "pretty good", 650 as average general credit-use behavior, and above 690 or 720 being excellent. Scores are based on payment history, outstanding debts, credit history, new credit, and credit in use.
Action for you to take immediately and going forward can be summarized below:
1) Find out what Trans Union and Equifax have listed in your credit score. You can write for a free copy or pay for an instant download at their respective web sites. http://www.transunion.ca and http://www.equifax.ca
2) Dispute any discrepancies on your credit score by contacting the two companies and diligently follow-up with any proof or documentation they request
3) Do things to build a good score.
a. Make payments on time
b. Don’t get credit you don’t need
c. Use credit wisely but consistently..inactivity can hurt you as well!
The Government of Canada offers a free publication called Understanding Your Credit Report and Credit Score. This publication provides sample credit report and credit score documents, with explanations of the notations and codes that are used. It also contains general information on how to build or improve credit history, and how to check for signs that identity theft has occurred. The publication is available online at the Financial Consumer Agency of Canada. Paper copies can also be ordered at no charge for residents of Canada.
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