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Homebuyer Tips: The Importance of a Credit Report Self Check and How to Do One the Right Way

If you are preparing to begin the house hunting process and will be relying on mortgage funds to meet the purchase price of the Waterloo Region home you eventually find – which applies to most homebuyers – then you know that your credit report is something that prospective lenders will be taking a long, hard look at. Which is exactly why you should do the same before you apply. You see, everyone makes mistakes and the credit bureaus that compile and issue those all-important credit reports are no exception. And their mistakes could cost you dearly.

Canadian Credit Report Basics

There are two major credit reporting agencies operating in Canada that your credit report may be pulled from; Equifax Canada and TransUnion Canada. It is up to the individual lender which company they choose to contact and work with and the information contained about you on the ‘competing’ reports may not always be the same as not all creditors choose to report to both bureaus.

Very few mortgage lenders base their whole decision on a credit report, they do take other factors into account and some may even be willing to overlook a certain negative item if there is a good reason behind the debt ( a temporary job loss that caused financial stress for example) But as a future homebuyer what you need to do is see what they are going to see first and to make sure that that information is correct.

Every 12 months consumers are entitled to one free copy of their credit report from each agency. Any additional requests do incur a fee, but that may be small potatoes compared to what inaccuracies on those reports might cost you.

To get your credit report begin at the official websites for each of the credit bureaus; www.equifax.ca and www.transunion.ca

What to Do Once You Get Your Credit Reports

Once you have your credit reports in hand it’s time to start fact checking them with a fine tooth comb. What you should be on the lookout for? the most common credit report errors include:

  • Mistakes in personal information, such as wrong mailing addresses or incorrect date of birth. These can lead to you being confused with another consumer or a lender being unable to pull a credit report for you because they are working with your real information rather than the erroneous information the credit bureau has.
  • Errors in credit card and loan accounts, such as a payment you made on time that is shown as late when you have the receipts and acknowledgments that can prove that was not the case.
  • Negative information about your accounts that is still listed after the maximum number of years it’s allowed to stay on your report. Although that varies a little between 5 and 7 years 7 years is almost always the cut-off point.
  • Obvious, and more subtle signs of identity theft, such as credit cards or loans listed that you never opened yourself. Those may not be the only things listed to look out for though. Cell phone accounts, store card accounts and even utility bills and magazine subscriptions can affect your credit if they have been allowed to fall behind or into default.

Fixing Credit Report Errors

If you do find errors you need to act right away. Contact the bureau involved in writing with a detailed breakdown of what is wrong and why and include copies of any supporting evidence (your real birthdate as displayed on your birth certificate, payment receipts etc) Send the letter by registered post as under law the agency only has 30 days to respond to you, so being able to prove when the letter arrived may be important.

Before the agencies can make any changes, they first need to check your claim with the lender that reported the information. If the lender agrees there is an error, the agencies will update your file accordingly. However, if the lender confirms the information is correct, and have the information to back it up, then the agencies will not make any changes. If changes are made a new copy of your amended credit report will be issued to you.

And one last note. Remember we mentioned that a lender may consider extenuating circumstances on a certain negative item? You can have a brief note of those added directly to your credit report. It’s called a consumer statement and it lets you provide details about an item on your credit report, using up to 100 words. The credit bureau won’t make any claims to potential creditors about its accuracy but they will add it if you so request, free of charge, so that a lender can make up their own mind.

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