Keeping your credit score healthy
Numerous pitfalls exist that can lower credit scores, and some are easier to identify than others, agricultural financial experts say.
Credit history
How long credit has been in use and how it’s been used represents 15 per cent of credit score weighting, says farm management consultant Denise Filipchuck.
She notes making above minimum payments will improve a credit score.
“The account activity is also considered, so be sure to revolve the account monthly and keep it active,” Filipchuck says.
BDO’s Dennis Sudo adds banks will likely examine current and historical proximities to credit limits.
Multiple numbers of open accounts could also be factored, he says.
Credit inquiries
Experts say warn multiple credit inquires could detrimentally affect credit scores.
“Multiple credit inquires in a short period of time may indicate higher risk, which would result in a lower credit score,” says Farm Credit Canada’s Kurt Makey.
Sudo encourages farmers to determine which credit bureau their bank uses.
“I believe that some bureaus will see multiple inquiries within a short time as one hit, understanding that one shops the market for the best terms/rates,” Sudo says. “Whereas others may see it as multiple hits.”
As the nature of farming often involves more frequent credit applications and inquiries, Filipchuck recommends farmers plan ahead and let their creditors know about planned purchases. This may also allow for package pre-approvals in advance of the purchases and reduce the amount of credit bureau inquiries, she says.
Check credit reports
Experts also remind producers about the importance of regularly going over their credit bureau reports.
This protects them against any potentially fraudulent activity or errors in reporting, Filipchuck says.
Make a habit of reviewing your credit bureau reports – it can alert you of fraudulent activity or reporting errors.
“We could run into a customer who would say they made a payment, and we’d say based off of what your credit bureau’s showing, you didn’t, or it’s still being disputed,” Makey says. “At that point our instructions to that customer would be make sure they talk with (the appropriate credit bureau) and make sure the reporting’s up-to-date.”
Bottom line
Financial experts say there are several factors that can impact a credit score. Making above minimum payments help improve the score, while multiple credit inquiries could be detrimental. And since farming can mean more frequent credit inquiries, experts say producers should plan ahead and keep the line of communication open with creditors.
Article by: Richard Kamchen
Everyone wants a great credit score and there are some steps farmers can take to not only build their own credit, but also avoid eroding a credit score.