For new immigrants: How to maintain a good credit score in Canada or elsewhere

Stopping the rain from falling

My friend does not understand.

If she wants a good credit standing in Canada, she must not shop around for good deals. But if she does not shop around for good deals, how can she be sure she will get the best value for her dollars? And why do the good deals need to look into her credit – which lowers her credit score – before they say she is good for them too?

She made a mistake.

She and her husband – new immigrants – window-shopped for a car. It took an innocent phone call to a dealer who would not stop until they stopped by his dealership. So they looked, and they loved a certain used Ford Flex. They do not have an idea of the monthly payments – or if they would qualify because they are new immigrants – so they had the sales guy lead them to this other guy and the lady who seemed like she was the boss. They did a credit check and of course, as new immigrants, they had a “thin file” and virtually no credit history.  Then they had the dressing down of their lives, because they were shopping around, and didn’t they know it would be bad for their credit?

The exact words were, “What are we doing here – having tea?”

My friend was furious – and embarrassed – and furious.

Especially when she learned that their little adventure cost her and her husband some points in their credit scores.

She looked at me and said, “We were just looking – we have not taken out a loan. Why would our credit score suffer because of that?”

According to a report by the Financial Consumer Agency of Canada (FCAC), the following factors influence a credit score:

• your payment history (Do you carry over a balance on your credit card from month to month? Have you ever missed a payment on any of your debts?);

• any collection or bankruptcy recorded against you (Has a collection agency had to collect an unpaid bill from you? Have you ever been bankrupt?);

• your outstanding debts (What is the limit on your credit card? Is your spending close to your credit limit?);

• your account history (How long have you had credit?);

• the number of recent inquiries made about your credit report (How many times has someone asked about your credit report?); and

• the type of credit you are using (Do you only have credit cards, or do you have a mix of credit cards and loans?).

True enough, the second to the last one was the one she did – unwittingly.

FCAC also states in the report that these factors do not all have the same weight in determining one’s credit score but that the most important factors are one’s payment history, whether one has ever declared bankruptcy, and the amount of the outstanding credit balances (although other elements such mortgage information and any personal inquiries a person has made may also be included in their credit report, they usually do not influence the credit score).

My friend says that what this tells her is that good debtors do not shop around from loan to loan to loan.

But that she does not get why it is not okay to shop around.

In her opinion, the deduction in her credit score should only be done when she does not pay the loan – because that is what would be logical.

But if I were a bank – and in these times of subprime mortgages and crumbling of world economies – of too much credit and a lot of defaults being made – maybe I would be careful too.

But too careful…?

Hmmm.

So when should the due diligence be done?

Definitely before the excitement kicks in and the salesmen get too eager.

Ah, the travails of a new immigrant. But learning how the game is played is half the battle.

Good luck, new immigrants. (good luck, us)

Article by Issa. Art by Danvic. Copyright 2009-2012.
Website: www.YouWantToBeRich.com
Email: issa@youwanttoberich.com

P.S. You can check out Ft Myers Title Loans too while you are at it.

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