Credit reporting is not an exact science. Credit agencies use unique methods to calculate your credit score and determine its history. In Canada there are two credit reporting agencies; Equifax and TransUnion.
How it works
Banks rely heavily on credit reporting. While some banks will look at both credit agencies when considering a mortgage application, others will subscribe to just one or the other.
Equifax and TransUnion are the two credit bureaux in Canada. Although there job is to report on credit worthiness it is the responsibility of the credit issuer to report up-to-date information to the credit agency.
If you purchase a vehicle from Dealership X for $35,000 on June 1, 2010 with a 5-year loan, it is Dealership X’s responsibility to report the new credit to one of the two agencies. For the next 5 years that dealership will report the loans current balance, if there were any late payments and any information pertaining to the loan up until June 1, 2015 when the report the loan paid and closed.
It is not the credit agency who is actively looking for accurate and new information but each individual credit issuer to report up-to-date information to there agency. This is important because the two credit agencies do not work together or share information and it is common for one agency to have out dated information, especially if all of your credit products (Credit Cards, Loans, Accounts, etc.) are held in the one bank who subscribe to only one Credit Bureau.
This dynamic can be particularly frustrating because when applying for a mortgage, a personal loan or even a cell phone, these factors are unknown to the average consumer. Have you ever wondered…
- Why one bank may offer you a higher loan amount while others offer less, or
- Why one bank has lower interest rates available, or
- Why the “I’ve been banking there all of my life” doesn’t equal special treatment.
Because of the credit information that they are using among other factors. As a Mortgage Broker I review both credit reports which come straight from each agency.
Together we walk through each report checking for accuracy, duplicate credit files under the same name, that all trades are reporting on both bureaux, up-to-date employment, mailing address and legal name on file, that any past accounts are indeed closed, to protect against fraudulent accounts or inquires and of course your score and how it impacts your mortgage.
Having this information available is another tool that helps me determine which bank is best suited for your mortgage needs. It also significantly reduces the amount of credit inquires, which you will see below makes up a portion of your overall score. This is a Broker advantage, having both credit reports we can submit the appropriate bureau to each bank reducing the need for them to pull their own.
Have you paid your bills on time? And if not, how late were you, when were you late and how often?
How much do you owe on each account, and how much of your credit limit have you used?
How long have you had each account?
How many credit requests have you made and how many reports have been pulled on you.
What kind of debts do you have?
Credit scores may range from 300-900. It is important to know your credit score and the role that it plays when making a major purchase or financial decision. This is why it is best to speak with a broker and ensure you are in the best possible position, so if any issues arise, we can address them. Credit can be a sensitive topic and your information it kept confidential.
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