While many people are aware of what a credit score means – for the most part, it is also often true that they may not be as aware of what actually goes into a credit file or report. For example, if you are applying for a loan and are told your credit score is not sufficient enough to secure the funds, then you may simply take this at face value without knowing exactly what has gone into calculating this score as well as what specific financial information can affect this number the most. We would all love to be a high credit scorer so we could have greater access to credit but it’s not always so straightforward.
An issue with your credit report can have many negative implications for borrowers, as there may have been mistakes or discrepancies that are weighing down their score and preventing them from obtaining the loans they need. I, like many people always took the credit score I was told I had at face value and never questioned whether or not this was the actual number.
In some extreme cases, people are denied loans and can’t understand why that would be as they have been displaying strong and consistent credit behaviour and their credit scores should fall within an adequate range. If you have been denied a loan and you can’t figure out why, this has maybe led you to wonder if your identity has been stolen and someone has been derailing your credit, without you knowing about it.
This in particular is a very good indication that you should contact the credit bureau agency and find out for sure what is going on. Even if you have been denied or are concerned about your score, you may want to consider contacting them just to be on the safe side – and simply just to see where you have perhaps gone wrong in your financial management.
At any time you can request a copy of your credit report through either one of the two Canadian agencies, Equifax Canada and TransUnion Canada. You may either request that a free copy be mailed to you or you can also ask for the immediate online delivery of your credit report for a fee. Whichever method you choose this is a beneficial way to keep track of every credit movement you have made in recent years, while also looking for any potential errors that could be interfering with your borrowing options. Additionally, it is also a good idea to get in touch with both bureaus, as some details may appear on one agency’s report and not on the other. This will also help you to narrow down the source of the issue.
Aside from major discrepancies, such as identity theft, there are also minor errors that may involve the mis-filing of a piece of information in the wrong borrower’s file. If you do find errors in your reports, there are steps to follow to reach some type of resolution.
You can once again speak to an agency representative and request a dispute form to fill out. These forms are also available online and once sent, the issue will be investigated. You will want to be sure to back up your claim with supporting documentation that illustrates that the actions on your file were not in fact taken by you. With a positive dispute outcome, you can expect to be sent a revised copy of your report and if you have applied for a loan through a certain creditor, then a copy will also be sent to them to inform them of your more accurate credit history and score.
Information Found in your Credit Report
Your credit report will contain a variety of financial details pertaining to each and every loan you have taken out in the last 5 or 6 years. On top of this data, whether you have paid your bills on time and on a regular basis will also be factored in. The total amount of debt you owe in comparison to you credit limit also reflects each loan you possess. Specifically, the factors that determine your credit score are correlated based on these following areas:
- Your Payment history: With a good record of routine payments, your credit score can earn a stronger rating. Missed payments, however will adversely affect your score.
- Your Outstanding debt: If your debt is over 50 per cent of what your credit limit is, this will harm your credit score and borrowers will want to aim for balances that fall below the 30 per cent mark.
- Your Credit Account history: If you have an established credit history you are often seen as a less risky borrower. As a result you will want to think twice before closing an old accounts before a loan application deadline. With a lack of history to your name, your credit score will also be lower.
It is also important to remember that even if you start rebuilding your credit, you will want to keep in mind that it can take time to see positive changes to your score. A good way to look at this is that your current credit habits, whether they are strong or poor will be reflected on your credit history for up to 6 years.
While you still want to work towards improving your credit, if you find your score has dropped, it can still affect future borrowing opportunities and some lenders may still choose to deny you a loan. This is certainly a reaffirming reason for trying your best to keep you credit in line and keep you with your payments.
Ultimately, I find it so helpful to now be able to pinpoint the specific areas that affect my credit report and in turn I now are aware of how to manage my accounts and my credit more accurately. Being able to link these actions to how the credit score is established is a valuable tool that I will use moving forward and knowing I can contact the credit bureau and keep a closer watch on my credit report is something I plan on using to compliant our ongoing financial demands and responsibilities.
