Your Credit Rating:
Have you ever taken out or applied for a loan, credit card or mortgage? Opened a utility or cell phone account? Chances are you have a credit rating.
This rating that you may or may not know about is very important to you. There are some of us that will swear up and down that they don’t need credit, they pay cash for everything. There was a time when this may have been possible, in today’s world, not likely. Try booking a hotel room, renting a car, traveling anywhere by any method, opening an account or buying anything on line. You will need a credit card. To get that credit card you will need a good credit rating. To get a car loan or a mortgage for your house you will need a good credit rating.
Information on a credit report:
A good or bad credit rating happens in various ways. Your credit report can be reviewed by various companies and financial institutions. Examples of things they can see on your bureau are:
who you are
date of birth
Social Insurance Number
any other aliases you may have
where you live
what jobs you have had
whether or not you have paid your prior bills on time
Collections, judgments and bankruptcies
Amounts owing on outstanding debt
Credit limits currently available to you
Credit report access:
The laws are very specific in regard to who can review your bureau and for what purpose. They can only do this if they have a “need to“ and if you give them permission. A need to can be defined as a legitimate business need such as rent, employment, financial applications or insurance. Unfortunately in some areas your permission does not have to written and is often implied when you fill out an application. Make sure to ask and read the fine details of any application you may fill out. Pulling your bureau too often will have a detrimental effect on your risk rating.
At this point you may be asking, “What is my risk rating?” Your risk rating or credit score (also may be referred to as a Beacon or FICO score) is a number assigned by the bureaus that indicates how likely someone is to pay back a loan or credit card (the likelihood of becoming insolvent) It is determined by how consistently you have paid your existing and previous financial obligations. This number could also tell a potential landlord if you would be a good renter or an employer if you are responsible and trustworthy person. When you apply for a loan or mortgage, the interest rate and loan amount available to you are also all related to your credit score.
I am a nice person, who says my score is low?
Your credit score is a statistical formula based on information reported about you to the credit bureau. The formula was developed by a company called Fair, Isaac and Co. For this reason most lenders refer to it as a FICO score. The FICO score is a three digit number that will typically come out anywhere between 400 and 820. The higher your score is the better. Some people will not have a FICO score at all and will show as what is called a FICO reject. This typically happens for two reasons. One reason is that you have never had credit of any kind before so there is no way to rate you. The other reason is that your credit is so poor that it is below the limit.
Some of the most important things used to calculate this score are:
Payment history: Have you made your payments on time and in full? Do you have collections, past due or delinquent accounts.
Amounts owed: Compares what you owe on your cards to the limit available. Are you at your limit on your cards or over your limit?
Length of time on your file: How long have you had credit in your name? Are you a new or experienced borrower?
New Credit: How often you have applied for new and additional credit.
Type of credit: car loans, lines of credit, credit card balances, prepaid visa for example
Credit bureaus receive this information directly from lenders and retain it to help others makes decisions about your borrowing capacity. It is important to remember that they are strictly a reporting agency. Any inaccurate information on your bureau was reported by someone to them. Although credit agency will assist you in correcting those errors it is more affective to go directly to the source; the lender that has reported the inaccuracy. In reality, your objection will be met with a form letter that basically “after our internal review we have found the information reporting to be accurate” so basically go away!
Who is responsible to fix the errors?
The 3 credit agencies are Experian, Trans Union and Equifax. You need spend a few dollars to get a copy of your bureau so that you know how you rate. Make sure that there is no inaccuracies and that everything on your bureau is in fact yours. Identity theft is a huge problem these days. Avoid having credit in your name that doesn’t belong by being aware. Take a look at your bureau at least once a year. You can also contact the Financial Consumer Agency for more help and assistance.
Facsimile: (514) 355-8502
Attention: Fraud Victim Assistance Department
P.O. Box 338, LCD1
Hamilton, ON L8L 7W2