Episode 26: (Re)Building Credit with Justine Cooper of ATB Financial
Updated: Nov 27, 2019
Welcome back to another episode of Chat with Brandy, a weekly show where we talk personal & business finance, taxes, and how to make money while doing what you love! I’m your host, bookkeeper and tax preparer Brandy Miron, and this is episode 26!
Today I had a special guest for this topic, from ATB Financial, Justine Cooper. Justine works out of the Wye Garden branch in Sherwood Park, and I brought her on to Chat with Brandy to talk about credit. Justine has been specializing in personal financing and has recently started working with business clients, entrepreneurs, small business owners, assisting both personal and business clients with all things credit.
First, what is credit? It is a tool which any lender will use to assess how clients have managed and honored their financial commitments, both currently, and in the past. The biggest indicator of future behavior is past behavior. Credit is a tool for lending institutions to use to assess the risk of lending money to individuals.
Why should you care about your credit score? You may feel that you don't need to be worried about your credit score, that you are financially stable and secure. However, financial situations can and often do change, sometimes very fast. To need credit and not to be able to get it can be a very frightening situation. Credit score is often the main things lenders will look at when deciding whether to lend money or not, so things like mortgages, lines of credit both business and personal, car loans, overdrafts. Your credit score will be an important piece of information for the lender to have, and it will help them determine things like what your interest rates will be, or perhaps a release limit will be applied. Your credit score matters, even if you aren't looking at borrowing money. Even if you own your house outright and have never borrowed money, your credit score will be looked at by others, like insurers, cell phone providers, etc. so keeping that score up is important.
What about if you're a new adult (just turned 18) or say you're new to Canada? Your credit score will be at zero, so you're starting from scratch. A great way to start building your credit is to go to the bank and see what small types of credit products you can get. For example, at ATB they will approve a 500 dollar Mastercard to individuals who are newly 18. It'll help you start establishing credit, and because it's a fairly low limit, it won't be too much of a detriment if things don't go your way financially. ATB is also very pro-education with new adults and want to help them develop their spending and finance habits to start them off on the right foot.
If you're new to Canada, most institutions will have programs and loans to help you get a financial foot hold and start building your credit. For example, if you've immigrated from another country, ATB has an automatic approval on a 2,500 dollar Mastercard, they can offer a preferred line of credit, and even offer vehicle loans. It's good advice to see what credit products are available to you. Having two credit products is the best way to start building that positive credit and establishing you financial foot hold, these can be any credit product, say the Mastercard and a cell phone contract. This can help move you in the right direction.
Once you've got a couple of credit products established, it's important to demonstrate responsibility and restraint with these products. No late payments, no missed payments, and lenders will look at the balance you carry on a piece of revolving credit, like a credit card or a line of credit, and they'll want to see that you're not carrying a balance over 50% of your limit, which is very important to keep in mind. If you're at your credit limit and are only making minimum payments, you're not only just paying the interest charges on the card, but you're actually hurting your credit score. It's vital to you building up your credit score that you don't carry a balance of more than 50% of your limit. If you are doing things that don't benefit or grow your credit score, you'll have those missed or late payments on your credit history for 7 years, so it's very important do take actions to improve or maintain your credit, like having an auto pay set up to pay your credit card off every month, setting up reminders on your phone to pay bills, anything to keep your credit positive.
For those people who have established credit but not positive credit things are different, but there is ways to rebuild your credit score. It's very easy for a person to damage their credit, but it takes work and time to turn that credit score around. Moving forward and restoring your credit is important, and the best way to start is to stop missing any payments. Bring any previously missed payments up to date and address any overdrawn accounts. A great benefit to your credit score will be paying up anything that you have in collections, it's vital to your credit to address these as soon as possible, most lenders will not even move forward with you if you have anything in collections. A good thing to look at is if you can settle a debt in collections, some debts can be settled for less than the amount owed. Say you owe 1000 dollars on a debt, the collection agency may take 800 dollars to settle that debt, but make sure you get a letter or agreement that they've agreed to take the settlement offer. If you can settle that collections debt or pay it in full, get a receipt or a later showing that the debt is settled. Next keep an eye on your rotating credit and keep those balances under 50% of your limit, be vigilant at monitoring and maintaining those accounts. If you're carrying a big balance on a credit card and only make minimum payments, you're only paying off interest, and if that balance is above 50% of the limit then you're damaging your credit score, so try to address problems like this as quick as you can.
There isn't really good or bad credit, it's more about how your credit has been managed, like are your bills being paid on time, is there some delinquency on your accounts. If you've co-signed for anything that debt will be reflected on your credit score, even if you have nothing to do with the debt, so take that into account whenever you're thinking of co-signing for anyone. It's also a good idea to avoid certain credit risks, such as taking a cash money or pay day loan, they're more costly than their worth and it shows a lender that there has been some credit mismanagement perhaps going on.
When lenders are looking at your credit store, they may have a minimum credit score they're looking for. For Justine at ATB their minimum is about 630, though there can be exceptions to that based on circumstances. If you've got a credit rating between 7 and 8 that's a really good place to be, and anything over 800 is fantastic, though that's usually something that's associated with age. The older you are the more chance you've got some positive reflections on your credit report, like a mortgage or a long history of positive credit reports. It's good to remember that actions which damage your credit rating will be on the record for 7 years, so try to avoid those financial pitfalls.
Things like bankruptcy or consumer proposal agreements can be detrimental to your credit score, but some lenders will have exceptions, like ATB, and will look at the complete financial picture, as some people are still deserving of getting financed, once you're discharged. You will have to be about 2 years away from that bankruptcy/consumer proposal though before most lenders will deal with you. There's more leniency towards consumer proposals as it shows a willingness to address and try to deal with their financial obligations.
So what is the difference between your credit score and the credit bureau. If you pull your credit score from any of the places it's available through, that score may not be what the lender is looking at. Depending on the lender, more or less influence may be carried by certain actions, like one lender will value the under the 50% limit while a different one may place more importance on no late payments. When you see your credit score, take it more as an indicator of how your financial health is, then a solid, locked in score. What a lender will look at is the credit bureau report which will have detailed information about your credit history and that will influence a lender more than the credit score alone. An individual may have a credit score on the lower end of things, but if their credit bureau report isn't that bad, say a missed payment or two, the lender may still consider to grant more credit based off that bureau report. It is a good idea to you to pull your credit bureau record, as it has all the details of your credit products, and it's this report which has more influence on lenders than just your credit score would. Say you've had a bankruptcy, that won't be evident based on your credit score, but it will be detailed in your credit bureau report.
The most important step to take on your credit journey is to talk to a professional. There's a wealth of misinformation out there, so find an expert who can show you exactly what your credit situation is like and who will help you to take action and get or keep you on the right path. ATB also offers a wealth of resources such as the entrepreneur center, courses, and networking events to assist you. ATB has a Facebook and Instagram pages with information, community events, networking events, current promotions and campaigns.
At Justine's branch they also have a Facebook page tailored more for the local environment called ATB Financial Sherwood Park Community. A great way to begin communication with Justine to send her an email or even if you just have questions she'd be happy to assist you on your credit journey. She's also available for assistance through text as well at 587-227-4237. Justine is very accessible and can handle not only your personal credit needs but your businesses credit needs as well. As a bookkeeper and business owner I feel that ATB offers some of the best rates out there for business accounts and they integrate seamlessly with Quickbooks online which I love! I hope this has been informative and beneficial for you, Justine was a fantastic guest and is a wealth of information herself.