Podcast Episode 33:
“$200 Is No Big Deal, Or Is It?”
Your good credit can be affected by inaccurate credit reporting. Even a small, bogus claim reported to Equifax or Trans Union may give you major grief even if you have a good track record and a fabulous credit rating. Check your credit at least once a year with Equifax or Trans Union; it’s free!
Credit Hassles (Part 1):
$200 Is No Big Deal, Or Is It?
My client was angry when he called me; I could practically see the smoke coming out of his ears. His bank was giving him a hard time over refinancing an already-owned property. Here’s the background.
A few years ago he got a call from a collection agency who said that he owed ABC Company $200. His response, “I don’t owe ABC Company any money. This sounds a little bit familiar, but I dealt with XYZ Company so I’m not sure exactly what you’re talking about. I can’t pay you unless you send me a contract or an invoice or something that proves I owe the money.”
The collection company didn’t send anything and he didn’t hear from them again. My client thinks about this and says to himself, “oh well, even if they reported me to the credit agencies, this will be off my credit record in two years.” Big note here: check your facts. Talk to a credit expert to find out how long items stay. Don’t trust hearsay.
Sometime later another collection company calls with the same attempt to collect for ABC Company. The conversation is a little more heated this time with my client demanding proof, the contract or an invoice, and the collection agency threatening court action, credit reporting and, generally, the end of the world. Again, nothing else comes of this.
Fast-forward to this year, and my client is sitting at the desk of his long-time, favourite loans officer at a major lender. As set out above, he is applying to refinance an already owned, positive cash flow investment property. The application goes fine with the usual light talk and banter that you have as a successful businessman and investor talking to your loans officer who has done numerous loans for you in the past, never any trouble.
The next day he gets the call from the loans officer. “We’ve got a little problem. There is a $200 claim on your credit record and you have to clean that up before we can do your refinance.”
My client has a bit of a short fuse and is outraged. “What are you talking about? I own a successful business that employs 10 people, eight investment properties with major positive cash flow, and my wife and I have Beacon scores of 730 and 750. This $200 claim is bogus!” (and he provides the background to his efforts with the collection agencies). “Doesn’t matter,” says his now not-so-friendly loans officer. “It’s policy with us and every major lender. Claims reported to the credit agencies have to be cleaned up. It doesn’t matter if the claim is big or small. It’s your problem, not our problem.”
Logically, my client sees that just paying the $200 makes sense. He’s a busy guy and he has already spent too much time talking to collection agencies and raising his stress levels speaking to his loans officer. But, he says, stop me if you’ve heard this one before, “It’s not fair!” So he calls Equifax, Canada’s major credit reporting agency, and explains the situation. They are sympathetic but not helpful. They say, “send us your rebuttal, your reasons why you think you don’t owe the money and we will send it to the creditor and get their comment.”
My client sees this as a giant time-waster and has a heart-to-heart talk with his loans officer who speaks to his superiors. They decided to make a one-time-only exception, but say this credit issue will have to be cleaned up for any future loans.
- Check your credit with Equifax and/or Trans Union at least once a year. It’s free!
- If you don’t know how to read the report, ask your lender or mortgage broker.
- Resolve every credit reporting issue. Even small claims have huge credit impact.
Contact Barry McGuire now. Alberta real estate needs an Alberta lawyer.