The Critical Lesson from John's Credit Journey

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Dear Wealth Creator,

It's been a while since my last newsletter, and that's because my offline work has increased tremendously over the past few months.

However, I've been compelled to write this particular article because I've been hearing from so many people facing the same issue: debt and its impact on their credit reports, which can hinder their ability to secure funds for current needs. Before sharing a story from which I hope you'll draw valuable lessons, let's first define what credit is.

Recently, I received a phone call from a friend, whom I'll call John. He needed financing to replace his vehicle, which had been written off. When the financial institution ran his credit profile, they discovered an item from 10 years ago that was holding up his approval.

The institution provided John with a copy of the report, which is not usually the norm. However, given that this company is barred from seeing certain information, John was advised to request his credit report directly to view fields such as contract codes.

The report revealed that the original bank had sold this loan to a debt collection agency, which then sold it to another third party. John did not recognize the name on the credit report and discovered through his research that it was a debt collector.

Over the years, neither the bank nor the first debt collection agency had sent John any correspondence, and the loan had ballooned to over four thousand dollars according to the first agency, while the current agency had a bill of thirteen thousand. Fortunately, the current agency was not a member of the credit bureau, so this debt had not been reported.

As an unbiased observer, I noted that many parties, including John, had dropped the ball. If you take out a credit card or any facility, you should know what you owe, as this is your financial responsibility. John only recognized he had an issue when seeking funding, which can be detrimental.

The institutions had never made him aware of the outstanding debt, and John had obtained loans over the years without issue. So why did this one raise a red flag? If this hadn't been flagged, John would have continued being oblivious to the financial debt shadowing him over the years.

It's crucial to pull your credit report at least twice a year, which is called a soft inquiry and does not affect your rating. This allows you to see what's listed and, if any errors exist, have them investigated.

So, what was John's solution?

He was advised to dispute the report to obtain further information from the first debt collection agency. He also sent correspondence to the Central Bank of Barbados as per the process. By law, the credit agency has seven days to rectify the issue. If they don't, a note is placed on record, and the requester is allowed to move forward without this hindrance on their file.

Every year, as a citizen, you have access to a free credit report, and you can see your credit score for a nominal cost of $30 from Everydata Barbados. No financial institution should know your numbers better than you.

Unfortunately, John's credit score is poor, and he is deemed high risk. However, he was fortunate to receive a provisional loan until he clears what is owed as per the report. Please note it takes seven years to get your credit profile in good standing. Therefore, John was advised that settling any debt would not immediately improve his profile.

Money mismanagement happens over a period of years, so it will also take time to unlearn behaviours, shift mindsets, and see these changes reflected on your records.

Don't let what happened to John happen to you. Know your financial status today!

Till I write again,

Your Partner in Wealth

Marcia

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