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Smart debt management means getting in the game with your credit report and credit score.

by:
Laurie Campbell

Think of me as a financial coach who’s always looking to improve bench strength. I encourage you to join my team, which consists of smart Canadian consumers who play by financial rules that make the game of life less troublesome, and far more pleasurable. Need credit help? Need debt help? Well, then you could probably use good financial counselling. Put those mental muscles to the test. Become financially literate. Start making a budget. And while you’re at it, be a good sport by familiarizing yourself with two very important guideposts in the field of discussion, namely, your credit report and credit score, which make up your credit history.

Just remember, your personal history includes your credit history, and your credit history can make you a winner or a loser when the time comes to borrow money – or maybe rent an apartment, or maybe get a new job. There’s a crowd out there watching your financial moves and when you make the wrong ones, well, let’s just say you don’t make a lot of fans and should look into credit counselling sooner than later.

Your credit history comes in the form of a credit report studiously prepared by what are called credit reporting agencies (otherwise known as credit bureaus). Perhaps you’ve heard of the two that operate in Canada - Equifax and TransUnion. If you’ve ever used a credit card, taken out a personal loan, or joined a “buy now, pay later” plan – among other borrowing modes - you can count on the fact that Equifax and TransUnion have prepared a credit report in your name. It fully covers your credit history and it’s available for viewing by appropriate parties.

And just who might those appropriate parties be? Well, in accordance with regulations, credit bureaus can sell credit reports to banks, credit unions, and other financial institutions, credit card companies, auto leasing companies, and retailers. Moreover, for assurance that you are trustworthy, other organizations are allowed to look into your credit history too including mobile phone companies, insurance companies, governments, employers, and landlords.

A credit report can cover a lot of ground in relation to your credit cards and loans. For instance, it contains facts about:

• when you opened your account

• how much you owe

• whether you make your payments on time

• whether you miss payments

• whether you go over your credit limit

• how you handle mobile phone and Internet accounts

• chequing or savings account closures due to money owing or fraud

Now, take a breather, and prepare yourself for another important facet of the game – your credit score, which is tallied not only by the credit reporting agencies but by lenders. In fact, credit scores even come with their own brand names such as Beacon, Empirica and FICO®. And yes, your credit score also is available for viewing by appropriate parties so once you know you have a problem securing credit counselling should become a priority.

Credit scores consist of three-digit numbers that essentially show whether you are a good or a bad credit risk. The scores are calculated on the basis of information in your credit report. They range from 300 (for very bad, high-risk folks) to 900 (for very good, low-risk folks).  You raise your score when you show lenders that you can use credit wisely. Your score drops when you show difficulty managing credit. Your score changes over time as your credit report is updated.

There are many other things you should know about credit reports and credit scores. Which is why I encourage you to visit an excellent Web site from the Financial Consumer Agency of Canada (FCAC). It explains all the ins and outs of the scoring game, particularly coding details that get down to the nitty-gritty of how you are rated financially. The website also provides information about how you can get your credit report free by mail, or how you can access it online for a nominal fee. It’s all yours to discover at http://www.fcac-acfc.gc.ca/.

For now, I’ll let FCAC have the last word on credit reports and credit scores.

“Businesses use your credit report and score to see how risky it would be for them to lend you money. It is up to each lender to decide on the lowest score you can have and still borrow money from them. Lenders may also use your score to set your interest rate and credit limit. If you have a high credit score, you may be able to get a lower interest rate on loans, which can save you a lot of money over time. While they are very important, credit scores are usually not the only thing a lender will look at. Often, they will also consider other factors, such as your income, job or any assets you own.”

So that, sports fans, is today’s quick mental work out to help build some financial strength. Stay in shape, will you. Keep those credit reports in order and those credit scores high. And for heaven’s sake, make a budget!

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