Your credit rating could be wrong!
Wednesday, 28 August 2013 14:56

In my most recent blog post, we discussed the importance of knowing where you stand financially. Although this is sometimes hard to face head on, it is critical for you to know so that you can move forward and take action.

Your credit report (also known as credit score) is your report card of how well you are handling your finances and debt obligations. This is not only calculated based on your behaviour with loans and mortgages, but also for all services you pay for AFTER you’ve used them, such as hydro, cell phones, cable, etc.

I cannot stress enough how important it is for you to know your own credit rating. Not knowing, would be like going to a doctor and saying “fix me” even if you have no idea how your health is, or what ails you. If you go to a bank, or apply for any service, without knowing your credit score you are at a distinct disadvantage. You may even be turned down for renting an apartment, or for insurance and you wouldn’t even know why.

There are many things that impact your credit score and you can learn more about this with my free report “Ten Tips To Instantly Improve Your Credit Rating”. Just sign up for my “mostly monthly” newsletter and you will be sent this free report right away. goo.gl/LPYJv

One of my readers (R. Brown, Calgary) sent me this comment after following one step on the report, which was to get a copy of your credit score. Thanks R. Brown for allowing me to share your feedback in this blog.

Thanks to your suggestion to get a copy of my credit score, I discovered that the Equifax report showed I still owed RBC $17,787 in student loans which I had paid off 12 years ago. Crazy.

The good news is that the Transunion report was correct. I followed your “action point” and called Equifax and they have assured me that the mistake will be corrected in 2 weeks.

Also, I've put your suggestion of checking my credit report quarterly into my online automated task list.”

The take-home message from R. Brown is:

-get your credit report (from both companies – this can be done instantly

online for less than the cost of a movie and popcorn). Do it now!

- check thoroughly for accuracy

- act on any inaccuracies in the credit report

R. Brown then got my book Financial Fitness for Beginners and discovered some new insights that helped him.

“Thank-you Diana. The tips are excellent. There are a lot of things I didn't know until reading your book - one is the 50% balance on credit cards. With business, I often have to purchase legitimate items that I invoice back to clients which may push my credit card to 80% of its limit, even though I pay it off in full on the due date. I didn't know this was hurting my score.

In the past I had always thought of credit as bad (even though I don't have a spending problem) - from now on, if the banks offer me a credit increase I'll take it - just not use it. In the past when the banks offered me increases, I would decline them - which now hurts my score because my legitimate business purchases are consuming too much of my available credit.”

The take-home message from R. Brown is clearly that the more you learn about personal finances, the better you are able to manage them. For him, he is quite correct about the benefits of accepting more credit on his card. However, it is critically important to understand that he does not have a spending problem, and he pays his card off in full each month.

If you do have a spending problem (i.e. you spend more than you make) and you do not pay off your credit cards fully, I would highly recommend you limit and even reduce your access to credit, to avoid temptation. The point is that we are all different in how we handle our money and we need to acknowledge our strengths and weaknesses.

I would suggest you learn as much as you can about money management, handling of credit, savings, etc. There are lots of books that you can borrow at the library, borrow from friends or purchase to keep handy on your bookshelf.

Don’t forget the most critical step in your education process….once you learn something relevant to your situation - take action!

P.S. You can order your copy of Financial Fitness for Beginners through www.financialfitnessbooks.com or through Amazon (print and Kindle version). I look forward to getting your feedback, so that we can share (anonymously) financial lessons for the benefit of all my subscribers.