If you have ever taken out a loan, used a credit card or taken advantage of a “buy now, pay later” offer, you will have a credit history.
Whenever a financial institution, such as a bank, a credit card company, or any other business gives you credit, it may send information about whether or not you make your payments on time to a credit-reporting agency. Credit-reporting agencies, also known as credit bureaus, are businesses that collect information about you and how long it takes you to pay back money you have borrowed. This information is called your “credit history“. When you want to borrow money in the future,the lender will check with a credit-reporting agency to see if you have a good credit history.
Having a good credit history is very important. If your credit history is poor, a lender can refuse to give you a loan. You may not be able to get a mortgage to buy a new house, or take out a personal loan. Lenders that may grant the loan may require you to pay a higher interest rate.
Your credit history is recorded by at least one of Canada’s two major credit-reporting agencies: Equifax and TransUnion. A credit report is a “snapshot” of your credit history. It is one of the main tools lenders use to decide whether or not to give you credit.
You have the right to see your credit report. No one else can have access to the information unless you allow it. When you apply for a loan or credit card, you are allowing the organization that is giving you credit to check your credit history.
Your credit report contains information about your past and present personal and financial situation. It contains personal information such as name, current and previous address(es), social insurance number, telephone number, date of birth and your current and previous employer(s).
It contains credit information related to any credit you may already have, such as a credit or retail card, a line of credit, a loan or a mortgage.
Banking information such as accounts you have including any NSF (non sufficient funds) information may be reported.
Any public records such as a bankruptcy or a credit-related court judgment against you will be reported.
It will show collection information as well. If you ever had a debt that you could not pay and it was referred to a collection agency for payment, it will be reported.
You are entitled to make a consumer statement to explain a particular situation, such as a dispute with a financial institution or a fraud warning on your file.
Any credit report inquiries will also be recorded on your file.
Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers.Both Equifax and TransUnion use a scale from 300 to 900. The higher the score, the lower the risk for the lender.
The formula used by credit-reporting agencies takes into account various factors such as the following: 1. Payment history. Is a balance carried on credit cards from month to month? Have you ever missed a payment on any of your debts? 2. Any collection or bankruptcy recorded against you. 3. Outstanding debts, what is the limit on your credit cards? is your spending close to your credit limit. 4. History, how long have you had credit. 5. Number of inquiries. 6. Type of credit you are using.
The above factors all go into determining your credit score.
It is a good idea to request a copy of your credit report at least once a year to verify that your personal information is up to date, that your financial information is correct, and to ensure that you have not been the victim of identity fraud.
Here are some tips on how to improve your credit score; 1. Always pay your bills on time. 2. Try to pay in full by the due date. If you aren’t able to do this, pay at least the minimum amount shown on your monthly statement. 3. Try to pay your debts as quickly as possible. 4. Don’t go over your credit limit on your credit card. Try to keep the balance well below the limit. The higher your balance, the more impact it has on your credit score.5. Reduce the number of credit applications you make. 6. Make sure you have a credit history. You can build credit history by using a credit card.
In addition to the above, here are some do’s and don’ts.
Do contact your creditors if you are having trouble making payments.
Do make sure that your monthly account statements are correct.
Do read the statements you receive from your credit card company carefully. Keep up to date on any fee increases or changes in your card’s terms and conditions.
Do deal with companies you know and trust.
Don’t accept or use any form of credit until you understand and are comfortable with its terms and conditions, to avoid any misunderstandings between you and the credit issuer.
Don’t wait to report any unauthorized transactions on your account. Contact your credit issuer immediately if your bill includes items you did not buy.
Don’t go over your credit limit on your credit cards.
If you are thinking about purchasing a home and would like to know what you would qualify for, give us a call at Invis – West Coast Mortgages and we will be glad to meet with you to discuss your specific situation. We can work together to put together a plan to correct weaknesses in your credit score if any exist, so that your dream of home ownership can be realized. We are here to help.
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