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Canada

Is your credit score hurting you? Here’s how to find out

During the eight years Richard Moxley spent working as a mortgage broker for a high-volume brokerage, he spent hours reviewing the credit reports of clients who thought they were handling credit well, but were shocked to see their mortgage applications turned down.

Moxley, author of “The Credit Game: Rules Every Canadian Must Know to Win,” found that many consumers had misconceptions about good credit and what it takes to maintain a good credit score and they were being shut out of the housing market.

Moxley decided it was worthwhile to delve deeply into the factors that contribute to a good credit score and educate fellow Canadians on how to work with the system.

“In Canada, we’re credit-score obsessed,” he said. “I want people to understand how the game is played and help them get the best rates when they are looking for financing.”

Today, Moxley, who lives in Calgary, earns his living helping clients restore their good credit as quickly as possible, ensuring that errors and fraud are removed from their credit reports.

We spoke with Moxley recently to get some tips on coping with credit challenges.

Tell me about Canadians and credit.

Canadians have one of the highest amounts of credit card debt per person. We love our cards. When the economy is strong, people manage credit better, but they still carry high balances even with the money to pay off their debt. When the economy tanks or something happens in their lives, that’s when they have problems controlling or managing credit.

Why do I need good credit as long as I have access to credit cards and already have a mortgage?

Credit affects more than just finances. You will get the best rates on insurance policies and it’s more popular now for prospective employers to pull a credit report on an individual. It affects where you live in terms of your mortgage or rent and it can even affect your love life. People who are separated or divorced often ask about a prospective partner’s credit before getting serious about a new relationship.

How long does it take before an inquiry into my credit no longer affects my credit score with the ratings agencies (Equifax and TransUnion)?

After 12 months, it has no effect on your score. It can still be seen on your report for a number of years, but it isn’t important to the institution that may be checking your credit. For example, if you have a recent payday loan, a bank might proceed with caution, but after 12 months, they put less emphasis on it.

Once I’m retired, it’s unlikely I’ll be looking for a loan, so why should I worry about my credit score?

You should be concerned about your credit score, because seniors are at the highest risk of all age groups for fraud. Although it can happen regardless of age, as you get older, it’s more likely that someone will target you since you’re not looking for financing and probably aren’t paying attention. If so, you’re the perfect victim. Check your credit score from both Equifax and TransUnion at least once, maybe twice, each year to make sure everything is in order.

I usually pay my credit card bill on the due date listed on the bill. Does my credit card company begin charging me interest prior to that?

Interest is actually charged, depending on the company, 15 to 20 days after the actual purchase. If you buy something at the beginning of the month and don’t pay for it until 30 days later, you’ll pay those high interest rates.

With regard to your credit score, as long as you keep up with the cards’ minimum payments and make them on time, you’re OK. However, if your card is with an institution other than the bank that has your accounts, you’ll need to allow two-to-three business days on each side for the payment to be made to that institution and processed there. It can cause some issues in credit reporting, so don’t wait until the due date to pay your credit card bill. Otherwise, you can get caught with late payments, which can have a huge effect on your credit score.

Also, be aware that if you use your card often during any month and have a high balance with respect to your credit limit, it can also have a negative effect on your credit score and can do as much damage as a late payment. The bank may take a snapshot of your credit during that time, so even if you pay your bill in full, the snapshot being reported to Equifax or TransUnion may make you seem like a high risk.

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Why do credit reporting agencies care about something as minor as a cellphone bill?

You may look at it as no big deal, but from their perspective, if you can’t handle something as minor as a cellphone bill, why would a bank give you thousands of dollars in mortgage financing? The good thing is that the total doesn’t matter, since there’s no limit — just whether you pay on time and in full. A cellphone bill isn’t like a credit-card bill with a minimum payment. If you don’t pay it in full, it can drastically affect your credit score.

All of these are things banks never tell you, which is why I’ve written about them. No one should have to spend as much time figuring out credit scores as I do, since I do it for a living.

This interview has been edited and condensed.

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