Reading your many comments on the credit rating, the way it is calculated displeases you and frankly frustrates you.
This way, as I wrote on Sunday1, penalizes consumers who have no debt, mortgage or car loan. Despite high incomes, significantly above-average savings habits, and assets with a net worth of a million or two, TransUnion can give us a score in the second quintile, you saw. Equifax seems a bit more generous.
“This score is not an assessment of the financial ability to pay, but more an indication that a consumer is a reliable interest payer,” laments Valérie.
In fact, when we pay little or no interest, the credit rating determined by TransUnion and Equifax can play against us.
It happened to Denis, a resident of the Eastern Townships who is stunned by the decision-making process of credit card issuers, based on the score. “I just tried to raise my Amazon Mastercard line of credit and they turned me down. I have zero debt (car, house, furniture, line of credit, etc.), I have two up-to-date credit cards [payées], and I’m worth about 1.5 million net! It’s crazy, they are depriving themselves of excellent customers based on incomplete information. »
What is even more deplorable is that the credit file is used by insurers to determine the cost of our home or automobile policy. The lower it is, the saltier the note will be. Ditto on the side of the banks when borrowing: a low score will drive up the interest rate.
This is precisely what worries Sophie. Like many people, she had an outstanding balance on her Visa card. When her position was abolished, she used her severance pay to completely erase her debt. Since then, she always pays her balance in full.
“I was proud of myself and thought my credit rating would go up. But the opposite happened! It discourages me, ”she wrote to me, graphic in support. In these circumstances, Sophie wonders if she will have difficulty renewing her mortgage in three years. “And since the car is almost eight years old, I might have to take out another car loan (or dealer financing) sooner rather than later… Will I be penalized? It’s very demoralizing. »
Guillaume is rather “insulted” to have seen his rating drop from 885 to 828 the day he no longer had a mortgage. “It should be squarely at 900 since the chances that I will not repay a debt, if I contract one one day, are 0%. »
A “dated approach”, according to the Liberals
In Quebec, the official opposition’s finance critic, Frédéric Beauchemin, considers that the credit rating is an “approach that dates”.
“Unfortunately, the current system is based on only part of the client profile, which can be described as a ‘shortcut’, because it facilitates decision-making for institutions.
“The implications for consumers, however, are generally a lower score and a higher cost of borrowing. In our view, there is room to improve the methodology and we believe that institutions and clients will gain from it at the same time,” he wrote to me.
Manon pleads for a “very big overhaul” of the current system which does “not at all represent our financial results”. “I own a chalet, three mortgage-free condos and I have a salary of $135,000! Can you explain to me why I wouldn’t be in the first percentile! »
Jacques, in Charlevoix, like the Union des consommateurs, would like Quebec to adopt a French-style system. “I find it absolutely absurd that a private company like Equifax or TransUnion can hold so much information about me and that it arbitrarily determines the level of my credit rating. »
Average for one, excshent for the other
A Rimouski doctor who always pays his debts “ruby on the nail” discovered that his rating at TransUnion is 756, which is “average”, while Equifax gives him an “excellent” score of 834. in addition to judging TransUnion’s valuation “aberrant” given his job, he wonders what can create such a significant gap between the two companies.
According to Hardbacon, TransUnion and Equifax use the same factors to establish a score, but do not give exactly the same importance (weighting) to each. In addition, “the duration of their impact differs in the respective algorithms”, adds the Montreal fintech company. The Koho site specifies that Equifax uses 81 months of data (almost 7 years), while the TransUnion model only takes into account the last 24 months.
The free consultation enjoyedthats easy
In closing, readers have rightly reminded me that Desjardins, BMO and Royal Bank and Scotia, in particular, allow their customers to consult their credit score for free on their own application or website. This method is the easiest, and don’t worry, it won’t affect your score.
Tax cut in effect since 1er July
You had probably forgotten, but since the beginning of the month you have benefited from the tax cut announced by the Legault government in its latest budget.
The first two tax brackets have been reduced by one percentage point each.
Thus, the tax on the portion of taxable income that does not exceed $49,275 has gone from 15% to 14%. While the next level (from $49,275 to $98,540) is taxed at 19% rather than 20%.
The tax reduction could reach up to $814 annually for a person living alone and $1,627 for a couple.
To take into account the tax reduction, individuals who are required to pay installments could adjust the amounts as of March 15, 2023.