Do You Need to Review Your Credit Score Before Consulting a Professional?
In the realm of financial management, a common question that often pops up is: Should I check my credit score before speaking to a professional? While your credit score plays a crucial role in defining your financial standing, it’s not always necessary to be aware of it prior to seeking professional advice. Let’s delve deeper into this topic to gain a better understanding.
Importance of Your Credit Score
Your credit score, also known as your credit rating, beacon score, or FICO score, is a numerical representation of your creditworthiness, derived from your credit history. It ranges from 300 to 900, with a higher score indicating a more favorable credit profile.
Factors that influence your credit score include:
- Payment history;
- Level of indebtedness;
- Length of credit history;
- Recent credit inquiries.
However, while your credit score is important for numerous reasons, it doesn’t necessarily impact your initial consultation with a Licensed Insolvency Trustee (LIT).
Role of a Licensed Insolvency Trustee
An LIT is a professional licensed by the Canadian government to provide advice and services to individuals and businesses struggling with debt. They can assist you in navigating solutions like Consumer Proposals or Bankruptcy.
A common misconception is that your credit score directly affects your eligibility for these services or the willingness of an LIT to assist you. In reality, your credit score is not a determining factor in these instances.
Preparing for a Consultation
For your initial consultation with an LIT, you need to be equipped with certain information, which does not necessarily include your credit score. Here’s what you should ideally bring to your Free Confidential Consultation:
- A list of your creditors and an approximate figure of your total debt;
- A list of your assets and their approximate values;
- Your personal or household income details, based on your situation.
These details will help the LIT understand your financial situation better and guide you towards the most appropriate solution.
The Value of a Credit Report
While your credit score isn’t crucial for your consultation with an LIT, your credit report can be quite valuable. This report provides a comprehensive overview of your financial history, including all past and present credit accounts, your payment history, collection history, and any insolvency proceedings you’ve filed.
Lenders, employers, and landlords may request your credit report before engaging in any business with you. Therefore, it’s beneficial to be aware of your credit report contents, even if you’re not required to present it during your consultation with an LIT.
Understanding Your Credit Bureau
Equifax and TransUnion are the two primary credit bureaus in Canada that lenders use for reporting your credit. It’s advisable to request your report from both bureaus, as they may contain slightly different information.
Each credit account on your report will have a rating attached, represented by a letter and a number. The letter indicates the type of debt, while the number indicates the status of the debt.
For instance, ‘R’ stands for revolving credit (like a credit card), and ‘I’ stands for installment credit (like a car loan). The numerical rating ranges from zero to nine, with zero indicating a new debt and nine indicating a debt in collection or written off in bankruptcy.
Regularly Checking Your Credit Bureau
It’s advisable to review your credit report at least once a year. This practice not only helps you maintain a healthy credit status but also guards against potential identity theft.
Remember, requesting your credit report does not impact your credit score. By law, Equifax and TransUnion must provide one free credit report per year.
Rectifying Errors on Your Credit Report
Given that your credit report is a trusted source of information for lenders, it’s crucial to ensure its accuracy. If you find any errors, you should immediately notify the credit bureau. They will provide a document for you to fill out to correct the errors. This process can be time-consuming, but it’s important to ensure the accuracy of your credit report.
Conclusion
While it’s not necessary to know your credit score before consulting a professional like an LIT, understanding your credit report can be beneficial in the long run. If you’re struggling with debt, don’t hesitate to reach out to a Licensed Insolvency Trustee for a free confidential consultation. They can help you understand your options and chart a path towards a better financial future.
Remember, understanding your credit report isn’t a prerequisite for debt solutions like Consumer Proposal or Bankruptcy, but it can give you a clearer picture of your financial situation.
