Understanding Your Credit Rating

What is your credit rating score? If you don’t know, you are at risk of being refused credit, paying higher interest rates or being considered a high risk by banks, employers or others who have access to credit rating files.

If you have a credit card, a line of credit or a car loan, you have a credit history and it is being recorded in a credit report by credit reporting agencies, Equifax, Trans Union or Experian Canada Inc. These Credit Reporting Agencies collect information on your ongoing use of credit and your repayment of that debt. As you continue to utilize your credit cards, pay your car loan or your line of credit, you will be assigned something called a “credit score”. A credit score is a numerical scoring measurement of an individual’s use of credit, specifically repayment of debt. A higher score would indicate a borrower has better management of their consumer debt while a lower score would indicat e poor management of consumer debt. There are several factors that can affect your credit score, for example, whether you pay your debts on time, the total amounts that you owe, delinquent payments, collections that may have been filed against you or limits that have been exceeded or “maxed out”.

If you currently have a mortgage or will be applying for mortgage financing, you may know that mortgage lenders will want to see your credit report. You will need to provide permission to the bank or mortgage broker to retrieve your consumer credit report for review, at the time of your application for a mortgage. Once the credit report is retrieved, it will be carefully reviewed, by the lender, to determine what mortgage rates you are eligible to receive. Many applicants are surprised to learn that lenders establish very specific guidelines on what mortgage rates they will offer and it is usually based on an applicant’s credit score.

Take the time to underst and how you can achieve and maintain the best credit score. When it is time for you to renew your mortgage financing in the future, you will be able to qualify for the best mortgage rates.

Here are some quick tips to help you:

1. Be sure to pay your bills on time.
2. Avoid exceeding your credit limits.
3. Avoid having too much available credit.
4. You should always know, validate and protect your credit rating as much as your SIN number and credit cards.
5. You can check your credit rating for accuracy once a year free of charge. Just call Equifax at 1-800-465-7166 or go on-line at www.equifax.ca and fill out the form at http://www.equifax.com/EFX_Canada/consumer_information_centre/docs/request_report_form_e.pdf or you can purchase a copy of your credit report on-line.
6. Often, a file contains data that is out-of-date or inaccurate. If you find any information on your credit report that is not accurate, you should contact the Credit Reporting Agency to have it corrected.
7. Be sure to download a copy of the document entitled “Understanding Your Credit Report and Credit Score” published by the Financial Consumer Agency of Canada by going to http://www.fcac-acfc.gc.ca.

This article was written by Elizabeth Blair, a Mortgage Consultant with Mortgage Edge. You can contact Elizabeth directly at (905) 510-5785, by email at eblair@mortgageedge.ca or visit her website at: www.missmortgage.ca