Tips on Credit for Canadians

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Knowledge is power, and I'm simply amazed by how many people are ignorant or oblivious about one of the most important pieces of publicly accessible information about them. So without further ado, I present the 7 things everyone should know about their credit -- but don't! 1. Getting married does not affect your credit score. Contrary to many popular myths, taking on a partner with previously bad debts or a bad score does in no way reflect on you, unless of course, you leave them in charge of joint accounts or those solely in your name. It's a gamble, but let's face it -- sometimes, so is marriage. Vice versa for marrying someone with stellar credit. It's still just theirs, but if they have great credit and great income, chances are you may improve your credit by just being in a more comfortable financial spot and paying your current bills on time. Your good or bad credit is yours and only yours until death do you part. 2. All bad debts must be taken off your record no longer than 7.5 years after the month it first falls delinquent. This means that if you stop paying your VISA in June of 2004, by December of 2011, it should be gone. Often it's 7 years to the month, but most bureaus leave a 6 month window for error and record keeping. In any case, it's not 7 years after the account was sent to collections as is commonly believed. 3. Checking your own credit through either TransUnion or Equifax (in Canada) does NOT affect your credit. And actually, you are entitled to one free report from both agencies once per calendar year. Also, when you are interviewing for a new company and one of their conditions of hire is a credit check, this doesn't show as well. Only companies looking to extend you credit can affect your score, the rest will only show up as inquiries when YOU access your report, not when future creditors do. 4. Prepaid credit cards do not affect your credit in the least. If you have bad or insufficient credit and can't get a traditional card, look into secured credit cards. You pay a deposit (between $100-1000 normally) and they assess you a like credit limit. Those prepaid mastercards that you see at places like Money Mart or CitiFinancial are a means to an end if you need a credit card right away for an online purchase or something similar, but carry no further longterm benefit for you. 5. Unfortunately, many companies never post any positive credit information about you without prompting from you. You can have several creditors with bills incoming on a monthly basis that get paid in full every month and still have horrible credit. Life in unfair, and it's a hard fact of life that often companies never take the time to report to a credit bureau unless the debt is delinquent or unpaid and sent to collections. Sometimes even the prompting doesn't work, and the only way to be sure that a company reports information on your account is to ask them specifically. 6. Settling on unpaid debts is not a good thing -- avoid at all costs. Often collection agencies will offer you a settlement amount (sometimes $0.50 on a dollar) in order to get at least a portion of the debt paid up. And often these same agencies will tell you that this will help your credit and will be reported immediately as paid after the debt is cleared up. It won't. If it is even reported in a timely matter it will be reported as 'settled' and this piece of information in particular makes future creditors leery about you as a risk. Even though it is the responsible thing to do, and you have paid something towards it, it still tells these creditors that your past debts were such a burden to you that you couldn't even pay them in full. And that the past creditors had to strike a bargain with you to get even a portion of their money back. Nothing good will come from it. Pay it in full or don't bother. 7. Cosigning on a loan or any form of credit does affect your personal credit if they default or are behind on payments! It's almost as if you took it on your own, because that person wasn't deemed financially responsible enough to take the loan on their own. If they default on the loan, no amount of begging, borrowing and pleading with the creditor will release you from the obligation. Make sure that if you ever cosign for something, they are someone that you would personally trust to pay you back the amount in full as if it were your own hard owned money, because it just might happen that way.