Welcome to Credit Tip Tuesday #9! Credit is something that is really confusing to many of us. There are a ton of questions circling the internet and lots of curious minds. Today we are going to answer the top ten most frequently asked questions we get about credit. If you have a question that you want us to answer, feel free to send us a message on Instagram, Facebook or Twitter.
What is a credit report?
Your credit report is essentially just a record of your credit activity and history. It will list the names of places that have given your credit or loans, as well as the credit limits, loan amounts and your payment history. It allows lenders to view your creed history and see your credit behavior, kind of like when you got a report card in school but the teacher won't call your parents if something goes wrong this time.
What is the difference between a credit report and a credit score?
A credit report, as mentioned above, shows a list of your credit history. A credit score represents what's in the credit report as a numeric value between 300 and 900. There are many different types of credit scores, and it's normal to have more than one. Lenders and credit reporting agencies (like Equifax or TransUnion) use varying scoring models to calculate credit scores, and the score you view may not be the score used by a particular lender.
How can I see my credit report?
You are actually eligible to view your credit report for free once every 12 months under applicable Canadian Federal and/or provincial Credit reporting legislation. To view your credit report visit, https://www.consumer.equifax.ca/personal/help/faq/request-free-copy-credit-report/
How do I get something taken off my credit report?
You have the right to dispute the accuracy or completeness of the information contained in your credit report. The first thing you should do is contact the merchant that put the information on your credit report, they have an obligation to investigate it internally, however, if they don’t you can then go to the credit reporting agencies to do an investigation which has to be complete within 30 days, they will contact the merchant to ensure than the information is accurate, if the merchant says that its inaccurate or does not respond then they will be removed. To dispute an item on your credit report, you can click on the links below:
Equifax: https://www.consumer.equifax.ca/personal/dispute-credit-report/
TransUnion: https://www.transunion.ca/assistance/credit-report-disputes
Does closing my credit card hurt my credit?
Answer: it depends, if you close it and it increases your overall debt service ratio then that is negative and it will hurt your credit. however, if you have too many credit cards then it won’t have any affect. If you have a lot of credit cards that you’re not using then you should consider closing one or two. Make sure you keep enough credit to have a good credit utilization ratio. Check out our blog post on this for more information.
Should I save money first or pay back my debt first?
This one is complicated, You ALWAYS want to save for a rainy day so building an emergency fund should be a priority, however ensuring that your debts are maintained is extremely important because that debt and the interest rates that come with it will eat into your savings. Every person’s situation is different so there is no blanket answer to this but typically you should put money aside for your emergency fund and pay off your debt as you go.
If I deferred a payment on my mortgage or car payment will that affect my credit score?
The short answer is no. The credit reporting agencies and lenders have viewed the pandemic as an exceptional credit event. Most lenders have created a special deferred payment option to help customers during this time. Just remember that any deferrals are not automatic. You will still need to contact your lender to confirm that you are eligible.
Can I merge my Canadian credit report with my U.S. credit report if I have dual citizenship with the United States?
Unfortunately since the U.S and Canada have different laws, you cannot merge your credit reports. If you previously lived in the United States and then moved to Canada then you will not have a credit history in Canada even though you have one in the states. You need to build your credit history in both if you would like to maintain good credit in both.
What are the main things that could hurt my credit score?
We've talked about how your credit is calculated by 5 main factors, Payment History, Credit Utilization, Credit History, Credit Inquiries and Credit Mix. These 5 things can help you build your credit when you understand them. According to Equifax, here are the most common factors that negatively affect a credit score:
How can I improve my credit score without going into debt?
Well we give a lot of advice on how people can build their credit step by step. The easiest way is to get a secured credit card. A secured line of credit or a secured card allows you to use money on credit, as long as you’ve put up the funds first to secure that credit. This mixed with the weekly tips on how to build your credit should start to help you notice a change in your credit. Remember, this is a process so it won't happen overnight. To Apply for a Plastk Secured Credit Card click here.
Hope this helps clear up some questions about credit but if you have more questions check out our other blog posts or ask us on social media. Thanks for reading!
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.