Other “derogatory” factors which negatively affect your credit rating, and which the Credit Bureaus don’t like to mention to you are:
One of the major causes of point loss to your credit rating is bureau reporting errors. (They can also cost you financially as shown in the CBC report on credit reporting mistakes) Errors can be delinquent accounts reporting on your file that do not belong to you, late payments that were not late, and credit that is created from identity fraud – therefore not your credit. The Credit Bureaus are paid by the creditors who pull credit bureau files and in turn who report to them. Credit reporting is done electronically, and Credit Bureaus accept the information they are sent without any investigation into the accuracy of the information. Therefore, is it critical that you pull your credit bureau file at least once every year. Only you will know when there is an error on your file, and it is up to you to have the credit bureaus fix it.
Look for these common errors:
- Wrong mailing addresses
- Incorrect Social Insurance Number
- Signs of identity theft
- Errors in your credit accounts
- Late payments
- Unauthorized hard inquiries
If there is an error on your file you must contact the Credit Bureau, then it is up to the Bureau to investigate your complaint and to verify the information contained in your file by contacting the reporting creditor. When contacted by the Credit Bureau, the reporting creditor will have to verify the item they have placed on your file. You are entitled to be part of that process.
Check your credit again 30-60 days after disputing errors. If any of the disputed inaccuracies remain, contact the creditor to further your dispute and determine if the item can be taken off your credit profile. If you want to tell your side of the story, forward a written request to the credit reporting agency to have a consumer statement added to your credit file.
- Moving/Time at Address
As previously discussed, a large number of credit file requests within a short period due to moving will lower your credit score. But on top of that, the length of time at your current address will influence your score, so try not to move a lot as it will affect your credit rating. The longer you remain at one address, the more points you receive.
- Changing jobs/employers frequently
The longer you stay at a job, the higher points your credit score receives. You are seen as having a secure job and therefore being a secure, less risky credit consumer.
- Having no mortgage, or no housing information on your file
The Credit Bureaus assign certain points for those who have mortgages and those who rent and deduct points for those whose housing situation is unknown to them. As soon as you pay off your mortgage, the reporting account is removed from your file and you are in the unknown category, which will actually remove points from your credit rating! Credit card and other credit account history will remain on your account even after being paid off and closed, but unfortunately, a paid mortgage does not benefit your credit rating. Imagine, you own your own home and that does not benefit your credit rating – does that even make sense? Also, not all mortgages report to the Credit Bureaus.
- Having high revolving credit balances
When you have high balances that are rotating between different credit accounts, this is a warning sign that you could be in financial trouble and therefore you could be considered a credit risk.
- Having no debt
Believe it or not, having no debt is bad for your credit score! Here we go again – if you don’t need to borrow money creditors will be trying to throw it at you. If you do need to borrow money and have no debt or debt history well, you will have a harder time of it. If you do not have a history of credit use on your file to provide something for creditors to evaluate, they will see that as a risk, and you will be deducted points on your score for not having credit accounts.
Raise your credit score:
- Correct errors, and track your report for future errors. Order your credit file from each bureau at least once per year.
- Lower your balances. If your debt levels are above 50% of your available limit, create a payment plan to reduce your balances.
- The biggest “tip” to having a good credit rating and a high credit score is to continually use credit and to repay that credit on time all the time. Set up automated payments to help with this.
- If you have no credit history or need to rebuild your credit, open a secured credit card account. You pay a deposit, which sets the limit of your card, then use it like a regular credit card. The pre-paid credit card provider reports your payment habits to the credit bureau(s), so you will be able to gain points with an account in good standing. Home Trust Secured VISA
- Look over our list, read your credit report, and identify any areas that could be improved for a higher credit rating.
- A debt management program can help raise your credit score, your debts go from R9 (delinquent) to R7 (credit counselling) which raises your credit score and helps you rebuild your credit. To learn more about debt consolidation programs in Canada and what your options are, fill out our quick form.
It is important to note that “your credit rating is not a reflection of your personal worth – it is merely a credit reporting tool” – Margaret H. Johnson. The good news is your credit rating is like your self-esteem, sometimes in your life, it will be high and sometimes it will be low – however, you can always rebuild it over time!