What’s YOUR score?

It’s something no one talks about but something people need to be better educated on. I am talking about one of your most valuable assets, your credit score. Most people walk around thinking they have amazing credit because they don’t charge purchases or they walk around not even really knowing what a credit score is. What people don’t realize is that your credit score is actually pivotal when it comes to taking one of life’s biggest steps, buying a house. Your credit history can make or break what kind of mortgage or loan you qualify for as well as what kind of lending institution you can go with. Most importantly it affects what kind of interest rate you can get. Your credit score is important when looking to obtain any type of financing whether it is for a house, a car or any other major purchase. If you are interested in learning a few basic things about your credit and how to nurture it than read on!

Christy Watt

A credit bureau is an institution that collects and keeps information on you. No matter what you do they are keeping track! Well, financially speaking that is! So if you missed your credit card payments for a month or two because you were backpacking through Europe, your credit report will show that and your choices are reflected in your score. You are responsible for your own credit history. A credit bureau keeps track of all of your monthly financial obligations and whether they are current or past due. It also looks at how much debt you have outstanding as well as your credit limits. Your report will also show any bankruptcies, or judgments that have been placed against you. The most common example of this would be an unpaid cell phone bill. Some people decide to fight their bill with their cell phone company on principle and what they don’t realize is that that company is more than happy to just place a judgment on your record which will eat away at your score and quickly bring your number down. The credit bureau compiles all this information and translates it into a number which is referred to as your score and that number is used as a numeric assessment of your risk level at any given moment. This number aids lenders in determining how dependable you might be when it comes to repaying your debts.

One of the biggest myths people fall into believing is that having no credit facilities (i.e. credit card, line of credit, and/or loan) is actually better than having some.  You can not build a credit history if you do not use credit.  So the key is using your credit facilities responsibly. A standard requirement that most lending institutions look for when looking at your credit report is that you have two active credit facilities reporting on your credit report. They believe that if you can keep a clean repayment history on two different items for more than two years that you are aware of the importance of your financial obligations and are (hopefully) not a risk to lend to. The best thing to do is to make sure you have two forms of credit at all times. You do not need to be using them constantly but as long as you use them periodically throughout the year, and pay them on time then you should be able to build a great score.

It is important to understand what affects your credit score. As mentioned before any judgments placed against you will lower your score. It is not a one time deduction either. It will continue to lower your score as long as it sits there. This is where it is very important to know what is on your credit report. It is often where people realize they have fallen victim to identity theft. Having your credit score checked repeatedly can also lower your score. Many people do not realize that every time they are looking to get a new credit card or are shopping for mortgage rates and filling out numerous applications that their credit is likely being checked each time. The more times it is checked the lower your score gets. Last but not least paying your monthly obligations late will also affect your score. Your credit report will show how many times you have been over 30 days late on a bill. The more late payments you have the lower your score gets which as a result makes you considered a higher risk.

Another important thing to know is that it is not impossible to rebuild your credit after going through a rough patch in life. If you have fallen behind on your credit facilities or find out you have some judgments placed against you, the most important thing to do is to correct them and work at rebuilding your credit history. One thing to consider is doing a debt consolidation loan or refinancing your mortgage if you already have one. The best thing to do is to consolidate everything into one monthly obligation so that you will find it easier to keep up with. Another reason that debt consolidation is an important step is that you are generally going to have a lower interest rate on your new mortgage or loan overall than you would if you were carrying those balances on your credit cards which often have interest rates that sit in the double digits. Once you consolidate your debts you can work on reestablishing your credit history by making sure you have two credit facilities reporting on your credit bureau and making sure you pay them each month.

There are many resources online that allow you to find out what your credit score is and give you the opportunity of looking at your credit report. You can contact one of Canada’s credit bureaus to receive a copy of your credit report by mail for free. If you want to look at it online you can do so if you are willing to pay for the service.

For more information you can contact one of the credit bureaus directly at:

·         TransUnion Canada: 1-800-663-9980 www.tuc.ca

·         Equifax Canada: 1-800-465-7166 www.equifax.ca

An important thing to note is that most mortgages do not report on your credit report so this will not help in rebuilding your credit. With mortgage rates as low as they are today it is often the best step for you when looking to consolidate your debt, however, this might not be an option for everyone.

Christy Watt is a mortgage lender with Dominion Lending Centres and she is also a member of Entrepreneurial Moms of Toronto. She is always happy to answer any questions about whether or not this is a smart financial choice for you. Additionally she is available to talk about credit report and ways to improve it as well as help figure out what her clients qualify for ahead of time. To find out more about Christy Watt fell free to check out her website at www.wattchristy.com or she can be reached anytime at 647 781 2474.