Your credit history is a good read. It is a biography of your life, written by following the money trail. It includes your date of birth, your social insurance number, your employers, and your marital status.
Anything in the public record, including bankruptcies, foreclosures, liens, judgments, and even financial counseling, can be reported on your credit record. It also lists your debts, including the balances on your credit cards. And like a nasty tattletale, it not only tells how often you have been late with payments but exactly how late you have been.Establishing and keeping a good credit rating is one of life’s imperatives. A good credit rating is necessary to purchase many goods. In Canada, there are two major credit-reporting bureaus: Equifax Canada and TransUnion. They assign you a credit score which is a number reflecting the weight given to many of the variables within your credit history. Most lenders use these scores to determine your eligibility for a loan.The score is used to predict how likely you are to repay your loan. Lenders can base their decisions on your character, security offered, the ability to repay, the amount borrowed and the purpose of the loan. However, many lenders simply enter your data into a computer and receive a single number in return. If your number falls above a pre-determined figure, you receive the loan. Below that number, you walk out the door empty-handed. Not all financial institutions use credit scoring, so ask your lender how borrowing decisions are made.If you want a good credit rating and score, follow these steps:
- Request copies of your credit rating and credit score from Equifax and TransUnion. You need both, because each company may have different information. If the information on either credit history is wrong, correct it immediately.
- Pay your bills on time. Even if a company allows a grace period, don’t use it. It lowers your credit score.
- Own between two and four credit cards. Fewer cards shorten your credit history; more cards indicate you are financially stretched.
- Make infrequent requests for additional credit.
- Pay more than the minimum required on your credit card. Not only do large credit card balances hurt your score, the interest rate on credit cards is steep.
Credit is a necessary part of life. Make sure your credit rating does you credit.