Our theme this week is guard thy credit rating.

Ron wants to buy a home. When he left university five years ago, he had a massive student loan debt. Over the years, his income has increased substantially so being the prudent Consumer, he kept sending larger and larger payments to his student loan creditor. He followed no real shedule. He figured that he was so far ahead of his original payment scheme, that it really didn’t matter how often he paid. During last summer, he went on holidays overseas and did not send any payments for 4 months, again figuring he was so far ahead that he really did not have to worry. At about the same time, he belonged to a book club who debited his Visa card automatically for purchases. Wanting to go overseas, he applied and was granted a new credit card with a higher limit, and aeromiles points. He wrote the bookclub to change accounts, and then left to go on holidays. He sent payments to his new Visa card while away, although he never saw the statements, figuring everything was OK. When he returned from his holidays, there was a stack of mail from his student loan bank, and a couple of nasty letters from his old Visa card creditor. The student loan people had not received payments in four months and were starting legal action. The Visa card message was along the same lines.

He promptly sat down to write the student loan Bank, explaining the situation that he was at least two years ahead of the schedule established by the Bank five years ago. The Bank wrote back to explain that over zeolous repayment is fine provided you do sent payments every month. When no payment arrived for four months in a row, no answer from phone calls, the Bank panicked and sent it to their legal department. He agreed that the Bank had erred on the side of caution, but was given assurances that his credit rating would not suffer. While he was at it, he wrote his old Visa company to ask them what the charges were on the card. He had a new card now and hadn’t used his old one in six months, but the bill said he owed $74. The credit card company wrote back saying it was the book club charges over the last 5 months. It seems that the bookclub never received his letter about changing accounts, so while he thought he was paying the fees monthly to his new card for the book club, the old card was the one getting the bills; and of course it received no payments. They straightened that out immediately, and again he received assurances that he should disregard the tone of their letters. He never thought about it until now.

Ron wants to buy a home, with 10% down. He certainly can afford this home with the kind of money he now earns. He fills out a mortgage application and discloses that his credit rating is good. The lending institution runs a credit bureau and what appears is data from the student loan bank and the old credit card company both stating that his accounts are presently current but historical data represents that he was recently 3 and 4 months late respectively. These are quoted as R-4 and R-5. The lender’s computer picks up the credit bureau file on the way to CMHC (Canada Mortgage nad Housing Corp) to be approved for high ratio insurance, since he is only putting 10% down. The CMHC computer rejects the application because of the two lousy credit ratings. Everything else on the credit bureau was perfect, but these latter two recent ratings killed the deal. Ron is upset beyond words. He explains to the lender the circumstances behind the ratings but nobody wants to listen. There is so much business out there that the path of least resistance is to move onto the next deal and forget about the ones that fall through the cracks in the system. Somebody had to listen. Finally, although Ron had to prove everything stated above, we got our approval.

For you credit novices, never take anything for granted. Set up an appointment at least twice a year with the local credit bureau to review your file. If there is anything out of the ordinary, you may have to go to great lengths to change a rating on your file. Don’t just accept assurances, you must follow up to make sure the corrections were made.