Friday, March 15, 2013

She's denied a mortgage after a 3-cent debt hurts her credit score: Roseman

This real life example provides a great credit coaching opportunity as this could happen to any client.

Ellen Roseman Personal Finance, Published on Fri Dec 28 2012
Diane Lowe's story will make you think twice about ignoring a balance on a credit card, even for only a few pennies.
While shopping at the Hudson's Bay Co., she decided to get a company credit card in order to get 10 per cent off her purchases.
Though she paid off the balance and cancelled the card last June, she started receiving monthly bills for 3 cents on her closed account.
Lowe admits she did nothing, thinking the small debt would be written off. This was a big mistake.
Large companies often report an outstanding balance to the credit bureaus (Equifax and TransUnion), which can downgrade your credit score and make it hard for you to qualify for a new loan.
In Lowe's case, she bought a new house in November and tried to move her portable mortgage at 2.2 per cent interest. But the bank turned her down.
"Now I'm paying 4.15 per cent interest with a secondary lender," she said.
"I have had multiple mortgages for 20 years and I have been a landlord for 10 years. I have always been in good standing credit wise."
That wasn't all. She couldn't get a line of credit from the bank for a deposit on her new home and had to refinance her existing house to pay the builder.
Capital One Canada, which handles the HBC credit card business, apologized to Lowe after I forwarded her emails. It also sent letters to the credit bureau and the bank that had refused her credit applications.
Spokeswoman Laurel Ostfield said credit card issuers had to report to the credit bureaus when payments weren't made by customers.
"It is important to review your statements every month to ensure you are not carrying an outstanding balance, because even small amounts can still negatively affect your credit score," Ostfield said.
"We encourage any customer who is unsure about an amount owing to contact us right away, so we can work with them to keep their account in good standing."
Lowe did call the Bay once she found out her credit score had been slashed. She asked for forgiveness of the balance — now grown to six cents — but nothing happened.
"I said, 'You guys are spending 67 cents to mail me an invoice for six cents. No wonder the Bay is going bankrupt.' I think I upset someone that day.
"Now I'm going to be paying thousands more in interest. Two separate houses are affected by my stupid comment."

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