Credit Reports

My first post in getting caught up is to answer a reader's question on how/where Jordan and I accessed our credit reports.  I should probably remind readers that this is written from the Canadian perspective.

There are currently two credit reporting agencies - Equifax and Trans Union.  Governed by provincial legislation they collect and disseminate information that pertains to Canadian's credit.  Keep in mind, that lenders are not required to report to these bureaus/agencies - they do so of their own volition; in part, I assume, because they believe it's in their and other creditors best interests to do so.  On that same thread however; not all creditors/lenders report to both agencies - some just report to one.

So the information that the two reporting agencies collect; comes from the lenders/credit giving companies that we interact with - like cell phone companies, banks, and even the government when you apply for student loans.  The information they collect also comes from us!  When we request our credit reports we have to supply personal identifying information; if we give them anything new - they will add it to the file for the next requester.

Now, speaking of requests - companies can't just go requesting your credit history or your score without your consent, so you should always know when it's happening (identity theft aside).

You can request your report, at no cost, by filling out their applications and mailing them in.  You can request a combination of your report and your score by filling out their online application and paying a fee.  The fee's vary, and change overtime; so I won't mention them here.

Speaking of the scores - there is no one; no company; other than the two reporting agencies, that know the magic algorithm that used to calculate it.  There are many people who guess; and I'm sure many educated people who are close to getting it right - but the fact is, it's not public information.

So - Jordan and I ordered our reports; not our scores.  We have no immediate or even short-term need to access new credit; so no desire to know what our scores are (other then curiosity, and we're not paying for that....you know what it did to the cat).

I've linked to the two sites above, and through navigating their sites you can find links to the printable application forms - it can take 3-6 weeks; longer if you have a very common name but when it arrives it's absolutely imperative that you make sure there are no discrepancies and fix them if they exist.

Fixing errors can take time; and if you don't take it when you don't need credit - it will be sure to come back and bite you when you do need credit.

My Money, My Choices - Level 4, Activity 3 and 4

Activity 3 is one I can really sink my teeth into, in this one, we have to check our credit history reports.  Activity 4 is to correct any errors.  I requested them for both Jordan and I on April 14th from both Equifax and Transunion and the Equifax ones arrived last week.

Managing your credit is your responsibility, and checking in on the two bureaus is part of that job to make sure that everything is right....waiting until you need credit, until your buying a home, refinancing, getting a credit card - whatever - is NOT the time to do this...because repairing mistakes can take time to fix.

I'm very pleased to share that everything is in good order!  The Kia and the Amex show up on Jordan's report and the Escape, LOC, Joint C/C, Cell Phones and my Visa show up on my report.  The mortgage however; is missing.

I called them, and apparently they only report to TransUnion - so we'll wait another week or so until that report shows up and check.

They do have some wrong contact information for us, and they haven't updated Jordan's job - so we'll get that sorted out and check this off as complete.

Credit History

The first and second activity in My Money, My Choices Level 4 is to establish and maintain credit. I believe that what Gail says is true at some point in every adults life, you will need to borrow money. Even to rent a car, or a hotel room, you need to have a credit card.

I got my first credit card at 18 years old - my first year of college. It at a $500 credit limit, and I still have it to this day; though the credit limit has changed to around $5K. This card is now rarely used - but I keep it for any work expenses that I incur that are reimbursable. It's the easiest way to keep things completely separate when I travel. 

Jordan didn't get a credit card until just a few years ago when we realized is credit rating was in pretty bad shape.  He didn't get a card as soon as he was legally able, and had a few dings from some early-adult rental arrangements that went sour.  It took a few years, but we got him a secure card, and he used it diligently for a year before he transitioned to a regular Visa.  He actually wound up cancelling it, because he found that he didn't use credit that was only in his name well - and didn't want the risk.

In addition to my personal Visa we now have two joint cards - an Amex where Jordan is the primary and a MasterCard where I am the primary.  The intent here was to build our credit score/history.

Activity three of Level 4 is to request your credit history reports to see if the bureaus are tracking all of your good behaviour, and you haven't been the victim of either identify theft or just clerical errors.  We did that a few weeks back, so they should be arriving in the mail any day now.

'the plan'

If you missed our omission of debt guilt, check out Friday's post...it's a doozy.

Here's 'the plan' to get out of the $18,860 debt hole that we're in.

1. Stop using Credit for 'entertainment'

Jordan and I agreed on step one before the wedding. 

2. Get all balances below 30% of available credit.

This is our first step for each card so that we minimize the impact on our credit scores - as without a doubt they have taken a hit.  Fortunatly the credit utilization part of your credit score can be fixed within a few statement cycles with large payments - we need to do this first so that if the bank re-checks our credit (which i'm sure they will) before we get the mortgage in Nov/Dec - we're still in good shape.

3. As the interest rates are the same, pay the balances down in order of smallest to largest

I beleive in small wins before you get to the end goal as a motivator - by paying off the smallest balance first we'll not only get some of these small wins, but we'll also pay the least amount of interest.

Pretty simple right?  We were blessed that we had some amazing monetary gifts from the wedding which are going to help us acheive goal one for our personal cards this month and goal one for the joint card next month.  We'll then attack Jordan's card, mine and then the joint.

Here it is in spreadsheet form:

This image shows you the summary of the plan - you can see that each payment also accounts for regular spending as well (as described above).

Part One -

We will only use our joint CC for gas/groceries (as those are very consistent) - entertainment will now be paid for using cash.  Here are our averages for the last ten months and our commitment until Christmas:

I've zeroed out booze and eating out as that will be all part of the entertainment.  Education is for Jordan who goes to school once a week and needs $ for parking and other items.  I'd like to take out $50 every friday and use just one 'jar' for that - but i need to see if Jordan wants to do one a week or one a month at a time.

Part Two -

The first column shows our maximums, the second column is what we want our maximum balances to be for the purpose of a solid credit score and the third column is the immediate payments we need to make.

Part Three -

You can see the breakdown of the payments for each month here

The grant is the $1,000 Jordan gets for each completed year of his apprentice.

Summary:

If you made it this far in reading, this spreadsheet basically summarizes everything i've already described.

phew.

but wait.

We still owe $2,100.54 (plus probably a couple hundred dollars worth of interest)
(ps the credit card balance in the previous screen shot is less b/c my spreadsheet was broken and not behaving properly - it will be $2,100 remaining owing not $1,015 as shown above)

yup.  we do.

Iffff our roommate stays with us for October/November - we'll have another $1,000 to apply to the balances and the rest will be taken care of in December.  I'm hopeful that our house won't be ready for possession until december so that we'll be able to do it in one payment instead of two or more.  We also may get our damage deposit back which was $1,275 - so that and the roommate could potentially pay of the rest by Christmas.

thoughts, questions, comments - we're all ears

Our Credit Scores

In preparation to meet with a mortgage broker last weekend, Jordan and I checked our credit scores.  The last time we had done this was almost an exact year ago for me and two years ago for Jordan - the results were surprising on both accounts.

My score has gone down, and Jordan's has gone up - significantly.

My equifax score went from 769 to 755.  Two years ago, my equifax was 749.  I feel pretty good about the score and understand why it went down a touch.  When we got our joint credit card, they checked my credit - so I have a recent hard inquiry on my report.  Further to that the history of that card is very short (three months).

When Jordan was looking at purchasing his truck two years ago, the bank told us it was about 650 (I can't remember the exact number).  I wound up having to be the sole name on the loan because of it, though Jordan made all of the regular payments.  Jordan had to do some work clearing up an old debt and starting to re-build/build his credit.  Part of that process involved getting as secured credit card with his bank - keeping the balance low and making regular payments.

Well, the diligence paid off.  His credit score, two years later is 747.

We are more confident than ever about seeing the mortgage broker.  We are so looking forward to what he will tell us about our readiness to buy a home of our own.

My Canadian Credit Score

Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. In Canada, there are two credit reporting agencies: Equifax and TransUnion. You can receive either just your credit report via mail, or you can receive your credit report and your credit score if you pay a fee and order them online.

It's been about a year since I last ordered my scores, so I thought it was a good time to check them again. With our home buying timeline advancing, we're also looking at checking Jordan's credit score to see how much it's improved over the last year and what we need to do to continue to improve it, I'll write more on his another day.

The last time I checked my scores in January, they were 788 (TransUnion) and 749 (Equifax). They are now 829 (TransUnion) and 769 (Equifax). These scores are very good - but it would be nice to see Equifax at the 800+ mark like trans-union is.

A lot of people have written about how to improve your score and how to actually order your score, but I'm curious about what the difference is between the two companies, and what do the differences mean. In my reading, I have found out that Equifax reports your FICO score, and is apparently used by most major banks. Transunion scores you, but it is not a FICO score.

hmm..

Can anyone shed some light on this, do you know what the difference is?

I know, at least in part, why my scores are so different. Forever ago I accidently opened a department store credit card, and cancelled it a few months later. It still appears open with Trans union, however is closed with Equifax. Further to that, Trans union doesn’t have my cell phone account listed whereas Equifax does. Finally, both bureaus have incorrectly listed one of my repayment amounts (it appears lower then it actually is).

I wouldn’t have thought that the above would translate to such a huge discrepancy. I wonder if the department store card is giving me a ‘false history’ with Trans union.

Does it even matter, if Equifax is the bureau most often used by big banks?  What are your thoughts on credit scores and the differences between the two reporting agencies in Canada?

This Weekend & The Bank

I don't believe that I have written about this before, but about eight months ago Jordan was looking to buy a small, used, truck for himself.  After much debate, we decided on a 2002 Ford Ranger.  The truck, although it has high kilometers, would be perfect for us.

We took out a personal loan for $4,500, during the application process we learned that Jordan's credit was not steller.  He was actually one of the SMART 18-20+ year olds who didn't sign up for a credit card as soon as he was legally able to.  Unfortunately, that also meant that his credit score was not very high because he's never had credit.

He signed up for a secured credit card and we are currently working to build his credit (which is a whole other post topic).

So, back to that loan.  The bank wouldn't give him a loan by himself, so I offered to co-sign.  In a super ridiculous move - the bank STILL wouldn't approve the loan (I do have a great credit score).  We then tried to get the loan with JUST my name and the bank pushed it through no problem.  I think, this is lame.

Anyways, this weekend Jordan decided to up the frequency of his payments and effectively increase the amount he's putting towards the loan each month.  What a process that was!

The bank lady who had apparently 'done lots of loans before', had never made such changes to an existing loan.  Apparently it's a pretty rare thing for people to want to pay their loans off early?!  So the whole process took well over an hour and it shouldn't have taken more then 20 minutes (the way I figure it).

oh, I didn't yet mention.  The way Jordan and I worked out the loan and payments is that yes the loan is in my name but all of the payments are debited straight from his account.

So he went from paying $216/month, which was what the computer calculated would take 24 months to pay off the loan, to $150/bi-weekly.  This increase in frequency and amount will shave off about 6 months on the loan.  It should be paid off by July/August of 2010.

Jordan is now 100% on board with bi-weekly contributions to savings/debt repayment ect.  It works sooo much easier then monthly budgeting!  He also split his RRSP contribution in half and is now doing that bi-weekly as well.

Although the experience at the bank was a little crappy, I'm so happy that Jordan decided to ramp up his debt repayments.  Having all of our debts paid off within the next two years will make our home buying experience in a few years time, that much easier.

How to Improve your Credit Score

• Always pay your bills on time. Although the payment of your utility bills, such as phone,
  cable and electricity, is not recorded in your credit report, some cellphone companies may report late payments to the credit15 Financial Consumer Agency of Canada reporting agencies, which could affect your score.
• Try to pay your bills in full by the due date.
• If you aren't able to do this, pay at least the minimum amount shown on your monthly statement.
• Try to pay your debts as quickly as possible.
• Don't go over the credit limit on your credit card. Try to keep your balance well
  below the limit. The higher your balance, the more impact it has on your credit score.
• Reduce the number of credit applications you make. If too many potential lenders ask
  about your credit in a short period of time, this may have a negative effect on your
  score. However, your score does not change when you ask for information about your own credit report.
• Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back.

For more details visit this website: http://www.fcac-acfc.gc.ca/eng/publications/CreditReportScore/PDF/CreditReportScore-eng.pdf