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Credit For Smarties!
 
 
 
Your credit report and score are very personal and important. It is vital for everyone to understand how to manage and protect this critical information.
 
Three credit reporting companies operate in Canada:
 
Equifax is most commonly used. All use a scoring system to determine your credit score. For example, Equifax credit scores range from a low of 300 to a high of 900 for excellent credit.
 

Several factors influence your credit score and each has a different impact on your overall assessment:

 

 35% Payment History: late payments, bankruptcies, collections and judgments
 30% Current debts
 15% Length of credit history and how long accounts have been established
 10% Types of credit, such as credit cards and bank loans
 10% New applications for credit  
 
Credit Score Factors
 
Now that we understand the 5 categories that make up a credit score, it is important to know how what factors influence your credit score and a lender’s decision. Most companies that grant credit for credit cards, loans and financing report to credit bureaus every month. Other companies also report outstanding amounts to credit bureaus. Here is a summary of factors:  
 
Late Payments
 
It is important to make your payments on time. Never miss a payment – even if it is for a small amount. Large or small, each missed payment counts against you.
 
Debt Utilization
 
This refers to the ratio of credit you have used compared to your total credit available. Ideally everyone should pay their credit card balances completely each month. When that isn’t possible, be sure to make your payments on a timely basis and keep your balances as low as possible. When your balances get too high, a consolidation loan can help you preserve your score and minimize interest too. Even one credit card with a high percentage of debt to credit available will negatively impact your credit score. 
 
Too Many Accounts
 
Most lenders look for at least 2 accounts per borrower but too many accounts will actually have a negative impact on your credit score.
 
Errors
 
Incorrect information can appear – especially for people with common names. See below on how to detect and correct errors that may appear.
 
New Credit
 
 New accounts can lower a credit score. Avoid applying for or accepting new credit cards that you don't really need. Not only does new credit lower your score, the lender will likely do a credit inquiry too!
 
No Credit
 
 It is very important for everyone to establish their credit. Young people that are starting out, newcomers to Canada and others that are starting again need to demonstrate two years of credit with at least two lenders.
 
Number of Inquiries
 
 Multiple inquiries have a negative effect as this suggests that a person is seeking credit from numerous sources.
 
Number of Trade Lines Reporting
 
 Everyone should have at least 2 trade lines (lenders) reporting on their credit report for at least two years.
 
Fluctuating Credit Limits by Lenders
 
 Sometimes credit card companies use credit limits that vary. If a limit remains unchanged and a higher balance is reported, it may indicate that the credit limit was exceeded and result in a lower credit score.
 
Serious Delinquencies
 
An unpaid account - even a small balance will result in a delinquency. Always make at least your minimum payments and make them on time. Once a payment or two have been missed, even a large payment won't erase the delinquent payment(s). Small oversights can eventually turn into serious delinquencies!
 
Outstanding Judgments & Collections
 
Never leave judgments and collections outstanding. If a dispute is being resolved or contested, it is a good idea to include a note of explanation on your credit report.
 
Current or Previous Bankruptcies, Consumer Proposals & Credit Counselling
 
Failing to Re-establish Credit After Delinquencies, Bankruptcy, Consumer Proposal or Credit Counselling
 
 
Managing your Credit and Credit Score
 
Review your own report & score at least once a year.
  • With Equifax, costs are:
  • Credit report only $15.50
  • Credit report & score $23.95
  • Credit Watch $14.95/month – provides e-mail alerts of changes, quarterly updates of report & score
Consider identity theft insurance
Pay off debts every month
Live within your means 
Pay debts and/or minimum balances on time
Consolidation loan – HELOC help to reduce your debt utilization
Distribute debt among cards to keep debt to credit limit ratios in check
Minimize inquiries
Keep new credit to a minimum and only as needed
Don’t overlook small balances
Time – it takes time to correct a problem with your credit report
Negotiate extensions with creditors – including credit reporting
Add an explanation for a problem on your report – disputed, job loss, illness, etc.  
Dispute errors by contacting Equifax & downloading and completing Consumer Credit Report Update Form:
  
By mail:
Equifax Canada Inc.
Consumer Relations Department
Box 190 Jean Talon Station
Montreal, Quebec
H1S 2Z2

By fax: (514) 355-8502

 


For an informed, intelligent choice...
 

 

 co·gent [ kṓjənt ]rationally persuasive: forceful and convincing to the intellect and reason. Compelling, conclusive, effective, satisfying.

 

 

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