What you need to know about credit reports
Understanding your credit score is essential to your financial health.
There was some shocking news for me in the federal Financial Consumer Agency of Canada (FCAC) survey released last month. Turns out 90 per cent of the 2002 respondents believed, incorrectly, that there was a cost to receiving a credit report by mail. As well, only 38 per cent said they knew how to dispute an entry on a credit report, down from 49 per cent in 2006.
These statistics bother me for a number of reasons: first, a substantial amount of money and energy has been poured into financial literacy, yet clearly the majority of people are unfamiliar with their credit report — an integral part of life these days.
Once predominantly used for assessing credit worthiness for borrowing, the credit score is increasingly a tool for landlords and employers to vet prospective tenants and employees.
When my daughter went apartment hunting last fall she discovered that about half the applications asked for permission to do a credit check. While you can certainly refuse — no one should be able to access your credit report without your consent — you're not going to get that apartment. Same thing goes with a job application. You can always stand on your rights, but you might also whistle in the wind while you're waiting for the job interview.
For employers, a credit check is a no-brainer since financial stress is a leading cause of employee absenteeism and low workplace morale. Employers are also concerned about hiring employees with financial problems if the job requires handling money.
Frankly, I don't like this privacy-invading trend. But my guess is that credit checks are going to become ever more prevalent.
FCAC's statistics also concern me because they imply that the vast majority of Canadians have never looked at their credit report. But this housekeeping practice is important for financial self-protection.
The information in credit reports tends to bite you at the worst possible times. In the extreme, bad credit can ruin a relationship, as was the case with one couple I met on my television show "Maxed Out." They were their late twenties, recently married, pregnant and hunting for their dream home. But when they were arranging financing, the obligatory credit check revealed the woman's student loan arrears, delinquent credit card payments and overdue bills. The husband hadn't known about these issues.
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