Correct me if I’m wrong, but I suspect you’ll be using your credit card more than usual over the next month. That may give more chances for thieves to steal your information, on top of their constant phishing for your personal information.
Checking your credit report periodically can be a good early warning system to alert you to potential misuse of your credit and your identity.
As your intrepid explorer, and not wanting to recommend something I haven’t done myself lately, I embarked on the process of requesting credit reports from Canada’s two largest credit agencies. Some funny things happened, which I will explain… But first, let’s review the difference between a credit score and a credit report.
Score versus report
Your credit “score” is a single number, which financial institutions use to determine quickly if they will consider you for credit. Your score could range from 300 to 900, but a score above 850 is very rare. For lenders, the score is useful, as a score above 750 means a "delinquency" rate below 2%.
A credit report is a comprehensive listing of all loans, credit cards, lines of credit, time payment plans or any other credit you have ever used, as reported to the credit bureaus by lenders. It shows up-to-date info about how much you currently owe (or could borrow on your currently approved credit) and your current payments. It also shows how many times you have been late, delinquent or defaulted, and lists any derogatory reports from institutions.
Carefully checking your full report at least once a year can point to inaccuracies, which you can then attempt to remedy. Perhaps more importantly, it may alert you to fraudulent use of your credit and identity.
An early warning system can be critical, as failure to make payments on a credit card taken out in your name fraudulently can result in the destruction of your credit rating. This can take a long time to remedy, as a Winnipeg woman recently found out. She spent three years trying to get Equifax to fix her credit report and score, which was only fixed after she got CBC Radio involved.
Payment history is the most important factor in your credit score. Other factors include credit utilization and credit history (using a variety of different types of credit and managing it properly), and time. Obviously, step one is to make all payments on time, no matter how small, and then be patient, as improvements come slowly.
If you are a young person starting out, applying for different types of credit and using that credit responsibly is the key to building up a credit rating and gradually increasing your score. Exploring the TransUnion website is a great way to become educated about all of this, as it is very comprehensive and well written.
Mentioning TransUnion brings me back to my story. TransUnion and Equifax are the big players in credit ratings in Canada. I attempted, without success, to retrieve a free credit report. (TransUnion does offer a free online “Consumer Disclosure” at www.ocs.transunion.ca but I kept running into “an error” with my application.)
Both Equifax and TransUnion offer a free report by mail, or instantly online if you sign up for a $19 monthly charge for credit monitoring. This is actually a good idea, if you suspect you might have been a victim of identity theft. These services monitor your credit and alert you to any applications made in your name or other suspicious activity.
When I completed the application process with Trans Union, the last step was to confirm they had the right person (after giving them my name, address, date of birth and social insurance number) by identifying one of my previous addresses. The problem was, the choices they gave me were all inaccurate. After 47 minutes on the phone with them, they finally determined who I really was. (I do, by the way, have a “very good” credit rating.)
It was a little scary to have their customer service rep tell me that “you must have a social insurance number that is similar to someone else’s” and not see the irony of that statement. Another surprise was a phone call from my credit card company within an hour asking if I had authorized the payment to TransUnion. Apparently, requests to credit bureaus are a very fertile ground for identity theft, ironically.
There are free credit services called Borrowell and Credit Karma. However, they make their money by sending you offers for credit cards, etc., which might not be the best thing if you are struggling with a bad credit rating ready. As well, I am always nervous about giving one more hackable website access to my personal data.
Always be extremely careful with all of your personal information, credit card numbers, account numbers, PINs, social insurance number and anything else that could allow someone to "share" your identity or access your financial accounts.
If you treat all of these things as cash, you will be less likely to leave them lying around. Shred (or burn) all statements when throwing them away.
Keep your identity private and your money in your own accounts.
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is a Certified Financial Planner and senior advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.