How to Protect Your Credit

January 23, 2013

credit score how to protectCredit Bureaus monitor credit utilization, debt levels, payment history, and current employers. They also capture collection items, bankruptcies, consumer proposals, and public records from Canadian courthouses. The largest credit bureau agencies in Canada include Trans Union, Equifax and Experian. These bureaus have compiled nationwide databases of consumer credit information on over millions of Canadians.

Credit reports are the basis for many future opportunities for consumers; employment background checks, credit checks for loans including auto or home, and much more. It is important to keep your credit bureau “in shape”, as good credit creates financial opportunities.

It’s wise to review your personal credit reports occasionally to ensure accurate information is posted. Keep an eye out for incorrect mailing addresses, social insurance numbers and birthdays, unauthorized inquiries, etc. Should you come across an inaccuracy, contact the credit grantor to further your dispute and request it to be removed from your credit bureau.

Credit scores are the most common and possibly the first item that is looked at when pulling your credit bureau. Scores range between 300 to 900 and a formula is used to calculate individual scores. The basic credit score formula takes into account various factors from your bureau and tabulates a value. These factors include payment history, outstanding debt, recent inquiries, types of credit, and credit account history. The higher the score; the better the report.

To improve your credit score, there are few things you can do. For starters, the most important impact on your bureau is your payment history. Payment history represents to debtors that you are responsible when making monthly payment obligations. If you cannot make your payments on time or pay the minimum amount, be proactive and contact your lender and try to make arrangements. The second most important factor is credit utilization. This represents how much of the credit granted to you is being used. If all your credit lines have reached their limits, it represents that you require those credit tools as a means of constant financial assistance. Ideally, try to use less than 35% of your available credit. Also, the number of inquiries that you authorize to be conducted on your bureau (credit checks) will have a negative impact on your credit score. If there are too many inquiries on your credit report, it may show concern for lenders. Having a mix of credit products could earn you a higher score – for example, a line of credit and a credit card. This shows that you are responsible with the various forms of credit lines available.

Every year thousands of hard-working, dedicated Canadians are denied credit due to prior credit mistakes, which result in poor credit scores. It is your responsibility to maintain your credit report.