Whats A Utilization Ratio Or Debt
According to Equifax, your debt-to-credit ratio, also known as your utilization ratio, is the amount of your debt compared to your credit limit.5 Your debt-to-credit ratio is important because if your ratio is high, it can indicate that youre a higher-risk borrower.5 Thats because lenders see borrowers who use a lot of their available credit as a greater risk.5
For example, imagine you have a couple of credit cards and a line of credit with a total debt of $14,000 and a combined limit of $20,000. Your debt-to-credit ratio would be 70%.
According to the Government of Canada, a ratio of 35% or below on credit cards, loans and lines of credit is recommended.3
What Can Lenders See On Your Credit Report
Your creditreport provides a detailed summary of your credit history. It includes your personal information and lists details on your past and current credit accounts. It also documents each time you or a lender requests your credit report, as well as instances where your accounts have been passed on to a collection agency. Financial issues that are part of the public record, such as bankruptcies and foreclosures, are included, too.
What Happens When You Open A Checking And Savings Account
Opening a checking and savings account requires that you have proof of a few things: your age , your identification and your current address. But you don’t have to worry about where your credit score stands.
A ChexSystems report shows banks a potential customer’s past activity with deposit accounts. It shows any unpaid negative balances , frequent overdraft fees, bounced checks and suspected fraud.
Access a free copy of your ChexSystems report once every 12 months by going to the consumer reporting agency’s website or by calling 800-428-9623. Note that your ChexSystems report has no direct impact on your credit score.
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Can I Trust The Score From My Bank
Any credit score provided on your bank’s app or by your request will be a dependable gauge of your creditworthiness, as long as the information on your credit report is accurate.
However, each credit score is calculated in its own unique way. For example, the numerical range for both general-use FICO® Scores and VantageScores 3.0 and newer is 300 to 850, but each model weighs the information found on your credit report differently:
- FICO® calculates all late payments the same way, but VantageScore prioritizes them, with delinquent mortgage payments being the worst.
- VantageScore ranks payment history as 40% of your score, but FICO® Scores counts it as 35%.
- FICO® Scores calculate all credit inquiries of the same type within 45 days as a single credit inquiry VantageScore counts multiple inquiries, no matter what they’re for, within 14 days as one.
Additionally, if your bank provides you with a FICO® Score, it may be based on your credit report from just one credit bureau. The three major credit reporting bureaus may have slightly different information on file about you, which means that your FICO® Scores can vary among them. If one credit report doesn’t indicate an account in collections, for example, FICO® Scores created from your credit file with that bureau will be comparatively higher. VantageScores, on the other hand, have a single tri-bureau model, so your scores will be more consistent.
Whats The Best Way To Check Your Credit Score
Banks Editorial Team
Banks Editorial Team
There are many ways to check your credit score. This three-digit number gives lenders and creditors an idea of how youve managed debt in the past and the likelihood that youll fall behind on future payments. It also plays a role in the interest rate youll receive on other financial products, like credit cards and personal loans.
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Other Accounts Included In A Credit Report
Your mobile phone and internet provider may report your accounts to your credit bureau. They can appear in your credit report, even though they arent credit accounts.
Your mortgage information and your mortgage payment history may also appear in your credit report. The credit bureaus decides if they use this information when they determine your credit score
A home equity line of credit that is added to your mortgage may be treated as part of your mortgage in your credit report. If your HELOC is a separate account from your mortgage, it is reported separately.
What Impact Do Credit Report Errors Have
Even a small error could have huge consequences and stop you from getting the best rates when borrowing.
Mistakes can range from basic errors relating to your address details to incorrect information supplied by your bank or energy supplier, which could deter another company from lending to you.
Missed payments stay on your report for up to six years and are the most common entry people dispute, according to Experian, accounting for just under a quarter of the queries it receives.
If a lender keeps chasing you for a missed payment even if youre not responsible for it you could end up with a default being recorded on your report, or even a County Court Judgement.
Find out more: is a credit report error wrecking your score?
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Get Your Credit Score And Report For Free
If you’ve ever applied for credit or a loan, there will be a credit report about you.
You have a right to get a copy of your credit report for free every 3 months. It’s worth getting a copy at least once a year.
Your credit report also includes a credit rating. This is the ‘band’ your credit score sits in .
Whats A Good Credit Score
So, what is a good credit score, anyway? Lets start at the beginning.
According to the Government of Canada, a credit score is a 3-digit number that represents how likely a credit bureau thinks you are to pay your bills on time.1 It can be an important part of building your financial confidence and security.1 For example, building a good credit score could help you get approved for loans and larger purchases, like a home.1 You may also be able to access more competitive interest rates.1
There are two main credit bureaus in Canada: Equifax and TransUnion.1 These are private companies that keep track of how you use your credit.1 They assess public records and information from lenders like banks, collection agencies and credit card issuers to determine your credit score.1
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Who Can See And Use Your Credit Report
Those allowed to see your credit report include:
- banks, credit unions and other financial institutions
- offer you a promotion
- offer you a credit increase
A lender or other organization may ask to check your credit or pull your report”. When they do so, they are asking to access your credit report at the credit bureau. This results in an inquiry in your credit report.
Lenders may be concerned if there are too many credit checks, or inquiries in your credit report.
It can seem like you’re:
- urgently seeking credit
- trying to live beyond your means
Contact The Credit Reporting Company
Whatever your problem, contacting or complaining to the reporting company is your first step. Before you make contact, read our information on:
- your rights
- how to complain.
You have rights â and credit reporting companies have rules to follow â under the Privacy Act and the Credit Reporting Privacy Code.
- What can be held: Credit reporting companies can hold specific information about you, eg credit accounts, repayment history, default payments, insolvency applications.
- Time limits: Time limits exist for your credit information, eg four to five years for most information.
- Who can access it: Only certain agencies and companies can access your report for specific reasons, eg lenders considering your loan application.
- Consent for access: Your consent is needed in most situations, eg potential landlords or employers, lenders. Some don’t need your consent, eg debt collectors.
- Identity fraud: Ask to have your credit information suppressed if you think you’re the victim of identity fraud.
- You have access: You can ask to see what information is held on you.
- Errors corrected: You can dispute errors on your credit report.
- Complaints: You can complain to the credit reporting company if you think your rights have been breached.
â Privacy Commissioner
How to complain
A free financial mentor can help you contact the company, or talk to the company for you. Start by contacting the free helpline MoneyTalks.
During the complaint:
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Example Wait To Get New Credit
In her early 20s, Sarah had three credit cards and didn’t take the debt seriously. At one stage she was getting letters from debt collectors. She ended up with a bad credit score. Four years later, she has paid off her debts and wants to buy a house. She checks her credit history and sees her credit card defaults will soon disappear.
Sarah waits one more year to apply for a mortgage, which improves her credit score. While she’s waiting, she makes sure all her bills get paid on time and her current credit card is paid off in full each month. The bank accepts her mortgage application.
Why Should I Check My Credit Report
If youre 18 or older and have ever taken out a credit agreement whether thats a mortgage, overdraft or mobile phone contract youll have a credit report.
You should aim to check your credit report regularly, at least once a year, and before applying for credit.
Not only will this allow you to pick up on any mistakes that could reduce your chances of getting the best credit deals, but you’ll also be able to spot if any fraudulent credit applications have been made in your name.
Because the information held on you can differ between the credit reference agencies, it’s best to check all three.
You’ll never be penalised for checking your report, so you’re free to do so as often as you like.
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What Information Lenders Will Ask For
When applying for a loan, a mortgage or a credit card, lenders will ask for your salary and income because these metrics measure how much money you have, or your capacity to make monthly payments. They may want to see proof such as recent pay stubs, tax returns, W-2 forms, direct deposit and/or bank statements.
For a sizable loan like a home mortgage or business loan, lenders will take a closer look at a borrower’s assets. These assets can include your cash, such as your checking accounts, savings accounts and CDs. They can also include investment assets, like your retirement accounts, stocks and bonds. Properties and material assets might also be taken into consideration, and you’ll need to show documentation of the appraised value if you’re planning to use them as collateral.
Who Can’t Access Your Credit
Unless youre posting pictures of your credit reports on social media, your credit information shouldnt be available to the public. It wont show up as a search engine result, and your loved ones cant request it, regardless of your relationship.
If an individual does use your personal information to obtain your credit history, you can sue for actual damages or $1,000 whichever is greater according to legal website Nolo.
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If The Information On A Credit Reference File Is Wrong
If you think any of the information held on your credit reference file is wrong, you can write to the credit reference agencies and ask for it to be changed. But you can’t ask for something to be changed just because you don’t want lenders to see it.
You can also add extra information about your situation. For example, you can add information if you have had a past debt but have now paid it off. This is called a notice of correction. This might help you if you apply for credit in the future.
Does Checking Your Credit Score Lower It
When a consumer checks their own credit score, it is treated as a soft credit inquiry that is not reflected on their credit report. For that reason, checking your credit score does not lower it. Instead, are based on five major factors: payment history , amount of debt , length of credit history , amount of new credit and credit mix . We recommend you check your credit score at least once a month.
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Do Banks Pull Your Credit Report Before Opening An Account
Most banks only pull your ChexSystems or Early Warning Services report. Its pretty rare for a bank to pull your credit reports from the three major credit bureaus to open a checking account.
Before you apply for a checking account, you can ask the bank or check their website. Most are transparent with what they require for you to open a bank account. If you come across a bank that checks your credit and you dont think youll qualify, there are many other banks to choose from.
See also:Banks That Dont Use ChexSystems
Who Computes Credit Score
Your Credit Score is computed by
When you make a transactionthe one that is relevant to determine your scorebanks send details about it to all four credit bureaus. To send details to all credit agencies is a mandate by the RBI. Essentially, banks keep Credit Information Companies up-to-date about your monetary habits. If a bank needs to check online credit score, they can approach any one of the bureaus. It doesnt matter which one because all will have the same score for you all four are equally authoritative and on par with each other.
After receiving information from the bank, credit bureaus get down to the task of collecting more information about your financial habits from other banks and financial institutions. The credit bureaus then processes this information to formulate what is called a .
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Which Credit Scores Do Banks Use
Many banks provide your FICO® Score, which is commonly used to make lending decisions, but banks can show you whatever credit score they prefer to use. Quite a few versions of the FICO® Score exist. If this is the score your bank provides, it will most likely show you your FICO® Score 8 or 9 because they’re used by the widest variety of lenders.
Another commonly used credit score is VantageScore®, which was created cooperatively by the three major credit reporting bureaus . It, too, comes in several versions.
FICO® Scores and VantageScores are just two types of credit scores that can appear on your app, though, so check with your bank to find out which it uses. There are many dozens of credit scoring models, including those used for only for educational purposes. Your bank may opt for any of them, including the one it produces and uses for its lending decisions.
How Is Your Credit Score Calculated
Your credit score is calculated by credit reporting agencies such as Veda, Australias largest.
Although these agencies score in different ways , in general the higher the number, the more likely you are to have your request for credit accepted.
To calculate your score, credit reporting agencies look at:
- Your debt , including any problems youve experienced repaying that debt
- Loans youve taken out for household, personal or family reasons or to buy, refinance or renovate a property or as a guarantor for someone
- Your credit cards and store cards
- Your current credit limit
- Accounts youve opened and/or closed
They will also check if you have a court writ or default judgment against you and look out for any history of bankruptcy.
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About Consumer Protection Bc
We are responsible for regulating specific industries and certain consumer transactions in British Columbia. If your concern is captured under the laws we enforce, we will use the tools at our disposal to assist you. If we cant help you directly, we will be happy to provide you with as much information as possible. Depending on your concern, another organization may be the ones to speak to other times, court or legal assistance may be the best option. Explore our website at www.consumerprotectionbc.ca.
Coronavirus: Will Payment Holidays Go On My Credit Report
Payment holidays were introduced in March 2020 to help borrowers struggling with the impact of the coronavirus pandemic.
The FCA says firms shouldnt report those in receipt of a payment holiday up until 31 January 2021 as having a missed payment on their credit report.
Borrowers who have had their maximum limit of payment deferrals should be offered ‘tailored support’ and this may be reported on your credit file, but lenders should always inform you as and when this is the case.
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How A Credit Score Is Calculated
Its impossible to know exactly how much your credit score will change based on the actions you take. Credit bureaus and lenders dont share the actual formulas they use to calculate credit scores.
Factors that may affect your credit score include:
- how long youve had credit
- how long each credit has been in your report
- if you carry a balance on your credit cards
- if you regularly miss payments
- the amount of your outstanding debts
- being close to, at or above your credit limit
- the number of recent credit applications
- the type of credit youre using
- if your debts have been sent to a collection agency
- any record of insolvency or bankruptcy
Lenders set their own guidelines on the minimum credit score you need for them to lend you money.
If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may be different from the score produced for a lender. This is because a lender may give more weight to certain information when calculating your credit score.