A reader was surprised to learn that he had the worst credit rating, even though he pays all his bills ruby on the nail. His story may serve as a warning.
Virtually all consumers have pre-authorized payments tied to their credit card. This helps to avoid unpleasant surprises (insufficient funds in the chequing account) and to accumulate points for rewards programs.
But it can get tougher when you decide to change the menu.
An avid traveler, our reader learned that the hard way when he swapped his for another, which had a more generous travel rewards program. His bank, which was also the issuer of both cards, had assured him to cancel the pre-authorized payment on the first.
However, a few years later, even if he has no debt, a credit application is refused. He learns that a pre-authorized payment of $100 was still due on his old card. The bank had never canceled it.
As a result, Monsieur inherited an R9 rating, the worst ever.
He takes steps with his bank, the card issuer and the credit agencies Equifax and TransUnion to have this rating erased. Nothing works. Everyone throws the ball back.
He is told that he will have to wait several years before this famous rating disappears for good. Meanwhile, any credit application is laborious.
“I would have paid for it without hesitation, that $100,” repeats our reader.
Be careful
“A lot of people find themselves in this situation,” comments Sylvie De Bellefeuille, lawyer and budget advisor at Option consommateurs. However, neither Equifax nor TransUnion can change such a rating. These credit agencies are content to collect from creditors the information that makes it possible to establish these ratings. »
Mme De Bellefeuille explains that our reader should have asked the original creditor (the beneficiary of the pre-authorized payment) to notify the agencies to correct the situation. A few years ago, Option consommateurs published research concluding that certain service providers or creditors used such ratings to engage in parallel justice, without the person concerned being informed.
For example, you have an argument with a cellular service provider, you pay the bill, but refuse to pay certain charges that you deem inadmissible. The supplier then issues a negative rating… which will be recorded on the credit file for six years. Without telling you.
Another example: you win a dispute at the Administrative Housing Tribunal, but your landlord sends a negative note to the credit agencies. You will never know!
As the law does not set any scale in these circumstances, the consumer is left to his own devices. “Especially since consumers are generally unfamiliar with the operation of the credit file, continues Mme From Bellefeuille. Proving that information is false is sometimes an obstacle course. »
Some credit scores
- R0 | File too new to be classified. Credit authorized, but not used
- R1 | Pay less than 30 days
- R2 | Pay between 30 and 60 days
- R3 | Pay between 60 and 90 days
- R4 | Pay between 90 and 120 days
- R7 | Account paid after debt consolidation at Court (voluntary deposit, consumer proposal)
- R8 | Repossession
- R9 | Bad debt, placed in collection; moved without having a new address; bankruptcy
Advice
- When you change credit card, ask for written proof (email, receipt) that all your pre-authorized payments have been canceled or transferred to the new card. Above all: check with the creditor or service provider that the change has been made. Don’t rely on the card issuer or financial institution.
- Check your credit file every year (New Year’s resolution), free online on the websites of the Autorité des marchés financiers, Equifax or TransUnion.