Money Lady: Learn more about loan applications

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Dear Money Lady, I wanted to know if I should agree to give my SIN when applying for a loan. Should I? Greg

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Dear Greg,

Most people never want to share their social insurance number for fear of being touched by their credit bureau, but unfortunately you may find it necessary when asked by your lender, who now has to guarantee their identity due to the increase in consumer fraud. If you apply for credit from a bank, open a bank account, or finance a vehicle, chances are you need to disclose your social insurance number (SIN). Many people still believe that they should never accept an inquiry or give out their social insurance number too often to get credit. They think their credit will be damaged or their rating and credit rating will go down. Sometimes it’s not true – So to help you out Greg, I’m going to dispel any myths and let you know what the banks are looking for.

There are two major credit reporting companies that all financial institutions and merchants use today. These are Equifax and TransCanada Union, agencies that rank and assign an overall rating to each person who uses credit. The system for measuring access to your credit score is indeed intuitive, which means that it measures and evaluates the type of merchant and request. So he knows if you shop. If you have multiple inquiries from different banks because you’re shopping for a mortgage, you generally won’t see a drop in your score (however, these inquiries must be contained within 30 days). The same when shopping for a vehicle, multiple accesses to your credit bureau by car dealerships will not change the score if contained within 30 days. But, on the other hand, if you really shop and go to different stores, apply for multiple credit cards, personal and retail loans, or purchase items on deferred payment plans , then YES, it will drop your score regardless of the 30-day limit.

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Above all, you want to protect your credit. It’s the foundation of all loans and it’s the only way lenders can judge your creditworthiness going forward. If you always pay your bills on time and have never filed for bankruptcy, chances are you have good credit. But if you are the opposite and your credit score is too low, you may find it very difficult to obtain future credit. Your credit bureau score can range from 300 to 900. Banks and A-lenders typically seek out customers with scores above 680 and will generally automatically decline applications with scores below 600. Credit card companies are a little more lenient and will go down as low as 530, with automatic denials for scores below 500. Here are some tips for improving your credit and maintaining a good score.

1. Pay your bills 2-3 days before they are due. Paying them on the due date (especially via online banking) will make you 1-2 days late. This is recorded on your credit bureau and will certainly lower your score without you knowing it.

2. Don’t carry over credit card or personal loan balances from month to month. This means that your credit is renewable and will automatically lower your score.

3. Resist the urge to have lots of open credit cards, even if they have no balance.

4. You must have some credit. If you previously had bad credit and now only use cash, you are essentially handcuffing your future. Without restoring good credit, the banks will turn you down every time.

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5. Late property taxes and child support payments can also lower your score once they are reported.

6. Late mortgage and vehicle payments, once reported (which usually happens after 60 days) are a big hit to your score. Please try to avoid this.

I have heard in the past that some merchants or banks are soft on your credit. Please don’t be fooled by this. There is no “soft hit” or “high hit” to your credit bureau. If they have your verbal consent (even if they don’t have your social insurance number) when adjudicating on a consumer credit application, they WILL REACH your credit and it will ADJUST your score.

Good luck and best wishes,

Written by Christine Ibbotson, author of 4 finance books and Canada’s bestselling book “How to Retire Debt Free and Wealthy” www.askthemoneylady.ca or send a question to [email protected]

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