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By Jim Middlemiss
Bankrate.com
Wednesday, October 26, 2005
We live in an age where information is king and tracking it is the bane of our existence. Census takers want information about where you live and with whom. Pollsters and marketers want your opinion on every conceivable topic, while schools keep transcripts of your marks long after anyone cares that you received a failing grade in a college course.
Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, "It's not really mandatory, but if you apply for a major loan, it can be constructive to know what's in your credit record.”
But there's one record everyone should watch like a hawk, especially since you have little say in what is being tracked or how. It's the report that can make or break your ability to survive in our debt-laden world, because it's the information of record that lenders examine before taking you on board. It's your credit report.
"[It has] a history of the credit that you have and also your payment history," explains Diane Rennie, community liaison manager at the Credit Counselling Services of Alberta Ltd., in Calgary. "This is the critical factor that a lender is looking at when trying to determine whether or not to grant you further credit. It is pretty important."
Historically, you could only get a copy of your reports from Canada's two major credit-reporting agencies, Equifax Canada and TransUnion of Canada Inc., by mail. But today, both offer access to your records online -- for a fee. But considering that you can still obtain copies of your reports for free by mail, is it worth it?
The price is high
Equifax charges $14.50 for instant access to your credit report or $21.95 for your report and your credit score. The score is a number between 300 and 900 associated with your credit history. It's the tell-all figure that lenders look at when deciding how much of a risk you pose. The higher the score, the less of a risk you are.
TransUnion allows you online access to your credit report for $14.95. For another $7.95, you can get your credit score and tips on how to improve it.
But TransUnion doesn't stop there. It also has a customized debt analysis report for $7.95. Those who want to guard against identify theft and keep vigilant watch over their credit report, for $91.80 a year, can get a credit report every quarter as well as weekly email updates, alerting you to changes in your profile or new inquiries made into your credit history. You can tack on the score and debt analysis for an extra $7.95 each, per quarter.
Many financial experts say it seems like overkill, especially since laws across the country entitle consumers to receive free copies of their credit reports when they request them in writing. They say it's important to check your credit record but question the need to review it frequently.
"You have got to check your credit record at least once a year, especially if you are applying for a loan, a mortgage, a credit card or applying for a job," says Patricia Lovett-Reid, vice-president and managing director of TD Wealth Management in Toronto. "The last thing you want to do is be surprised by incorrect information.
Adrian Mastracci, an investment counsellor with KCM Wealth Management Inc., in Vancouver, agrees. "It's not really mandatory, but if you apply for a major loan, it can be constructive…to know what's in your credit record."
As well, he says, if you are turned down for credit and the person declining your request "waffles around the reason, you might want to go check it." That's because there could be something in your file that discourages institutions from loaning you money.
Online access helpful for web shoppers, victims of identity theft
A credit report is a compilation of information creditors provide to the agencies as well as personal information about where you live and work. So, if you obtain a mortgage, the bank passes on that information to the agencies, which log it on your files.
Every time someone looks at your file, which can only be done when you give someone permission to do so, that activity is recorded. As more creditors access your record, your credit score decreases because it suggests that by shopping around, you may be experiencing financial difficulties. (You can, however, request to see your own record with no adverse effect on your score.)
If you fail to pay your bills, or are sued or go bankrupt, that information also appears on your record. As you age, borrow more money, change jobs and move, that information is supposed to get updated by the agencies.
However, mistakes can happen, notes Rennie. "They have a legal obligation to keep them accurate." Most do, she says, but since the agencies deal with hundreds of thousands of creditors and individuals, "there is bound to be some information that is not correct."
There's a process for correcting the record. In most provinces and territories, if a consumer disputes the accuracy or completeness of information in his file, the agency has to take steps to complete the information and correct any errors.
Consumers need to be wary of errors in their reports, and also of who is accessing their reports, as identity theft is becoming a bigger and bigger problem. "Someone may be trying to apply for a loan in your name," warns Lovett-Reid. So, if your wallet is stolen, for example, that's when buying into an ongoing monitoring service, or being able to access your credit report quickly, may be worth the money.
If you are someone who buys a lot of merchandise online using a credit card, you could be a candidate for identity theft and might want to watch your credit report more diligently.
Lovett-Reid adds it's "not always convenient" to apply for the record by mail and wait two weeks, even though it is free. Consumers can get the information "without any hassles. It's peace of mind and worth the price for those who want it."
But "make sure you understand what value it has for you" before spending the money, cautions Mastracci.
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