Personal Finance

RBC student line of credit ruins your credit score

  • Last Updated:
  • Mar 24th, 2019 12:02 am
[OP]
Newbie
Dec 8, 2012
25 posts
10 upvotes
ETOBICOKE

RBC student line of credit ruins your credit score

Learned this hard way. I got a student line of credit from RBC. Unfortunately, the neither the advisor nor the agreement states that taking student line of credit will continue to impact your credit score you pay off the loan. Why? It is because the way they set up the loan and how they report to Equifax.

This loan will always show 100% utilization of debt even though you keep paying the monthly repay amount along with interest. Debt utilization is the second biggest factor negatively impacting your score (30%). SO PLEASE AVOID TAKING THIS LOAN AT ALL COST AS IT WILIL CONTINUE DEGRADING YOUR SCORE UNTIL YOU FULLY PAY THE LOAN. For detail example, see below:

Assume that you have no other debts except this student line of credit. Assume that the original loan was for $10,000. Month 1 you pay $1000 as repayment. The new balance is $9000. However, the way they report to Equifax is that I have line of credit of now $9000 and it is fully utilized. They keep on doing this until the balance is 0. This is a glitch in RBC and they don’t care about it. Equifax also acknowledges that they have several such cases but RBC takes no action.
45 replies
Deal Addict
Dec 5, 2003
1423 posts
139 upvotes
Surprised by this... this sounds more like a non-revolving LOC, and when I had my Student LOCs, this wasn't the case (a while ago though).

Did something change with your credit worthiness and therefore your line is no longer revolving? You are right that if it always reports you has 100% utilize, it would negatively affect your credit, until you can return to a normal utilization %. But, in reading this, I feel there's a chance your case is not universal for RBC Student LOC.
Deal Fanatic
Nov 22, 2015
5789 posts
5299 upvotes
smanmit2 wrote: Learned this hard way. I got a student line of credit from RBC. Unfortunately, the neither the advisor nor the agreement states that taking student line of credit will continue to impact your credit score you pay off the loan. Why? It is because the way they set up the loan and how they report to Equifax.

This loan will always show 100% utilization of debt even though you keep paying the monthly repay amount along with interest. Debt utilization is the second biggest factor negatively impacting your score (30%). SO PLEASE AVOID TAKING THIS LOAN AT ALL COST AS IT WILIL CONTINUE DEGRADING YOUR SCORE UNTIL YOU FULLY PAY THE LOAN. For detail example, see below:

Assume that you have no other debts except this student line of credit. Assume that the original loan was for $10,000. Month 1 you pay $1000 as repayment. The new balance is $9000. However, the way they report to Equifax is that I have line of credit of now $9000 and it is fully utilized. They keep on doing this until the balance is 0. This is a glitch in RBC and they don’t care about it. Equifax also acknowledges that they have several such cases but RBC takes no action.
So is it a loan or a line of credit?

It sounds like you have a loan and not a PLC. Pretty sure RBC student lines of credit report correctly to the bureaus.
Deal Addict
May 15, 2013
1772 posts
478 upvotes
Montreal
I have a RBC study loan (backed up by the government) and doesn't have your issue.
[OP]
Newbie
Dec 8, 2012
25 posts
10 upvotes
ETOBICOKE
iamthebest wrote: I have a RBC study loan (backed up by the government) and doesn't have your issue.
What you mean by backed up by government? If you have student line of credit, you have this issue. Check with RBC and question them on utilization. I already got RBC acknowledge the issue and Equifax is also aware of this with RBC.
[OP]
Newbie
Dec 8, 2012
25 posts
10 upvotes
ETOBICOKE
It does not report correctly. Both RBC and Equifax acknowledges. Loan is never shown 100 utilization. There is a separate code for that. Check with your back and ask them with the example I gave.
Deal Addict
Oct 16, 2013
2347 posts
710 upvotes
New Brunswick
smanmit2 wrote: What you mean by backed up by government? If you have student line of credit, you have this issue. Check with RBC and question them on utilization. I already got RBC acknowledge the issue and Equifax is also aware of this with RBC.
Wait, you never heard of government back student loans?
Deal Addict
Dec 5, 2003
1423 posts
139 upvotes
smanmit2 wrote: It does not report correctly. Both RBC and Equifax acknowledges. Loan is never shown 100 utilization. There is a separate code for that. Check with your back and ask them with the example I gave.
So your line of credit reports 100% utilization even though you can draw more funds from your line, since you have repaid a bunch?
Newbie
Oct 7, 2017
3 posts
From personal experience and checking my credit reports, during the period of study, the LOC is like a credit card and reported as such with amount owing and limit. Once the LOC enters repayment, it is converted into a loan so there is no limit, no utilization as such.
Deal Fanatic
Nov 22, 2015
5789 posts
5299 upvotes
Sorry OP, you're either mistaken or wrong.
[OP]
Newbie
Dec 8, 2012
25 posts
10 upvotes
ETOBICOKE
Actually repayment is when the real problem starts. As soon as it goes in repayment mode, it will show reducing balance with 100 utilization. Unfortunately that’s how they are reporting it. Confirmed.
Deal Fanatic
User avatar
Aug 22, 2005
7810 posts
986 upvotes
smanmit2 wrote: Actually repayment is when the real problem starts. As soon as it goes in repayment mode, it will show reducing balance with 100 utilization. Unfortunately that’s how they are reporting it. Confirmed.
That's because it converts into a loan. Like a car loan, no effects on utilization.
Deal Fanatic
Nov 22, 2015
5789 posts
5299 upvotes
smanmit2 wrote: Actually repayment is when the real problem starts. As soon as it goes in repayment mode, it will show reducing balance with 100 utilization. Unfortunately that’s how they are reporting it. Confirmed.
Yes, exactly. That's how a loan is supposed to work. It doesn't "ruin" your credit or even affect it much at all.
Deal Expert
User avatar
Jan 27, 2004
45906 posts
8892 upvotes
T.O. Lotto Captain
its disappointing... But that's exactly like how it works.
The credit score system is there to help lenders and creditors assess risk.
IF you have a credit product that has dedicated fixed monthly payments... that sounds exactly like what your student LOC is when it turns into repayment mode after graduation.
Thus... LEnders need to know this to help determine if they can extend you credit within their risk tolerance.

In the end of the day... As long as you pay your bills and loans on time, and don't max things out... and you keep working... You'll most likely have little problems getting credit that is suitable for you.
Deal Addict
May 15, 2013
1772 posts
478 upvotes
Montreal
smanmit2 wrote: What you mean by backed up by government? If you have student line of credit, you have this issue. Check with RBC and question them on utilization. I already got RBC acknowledge the issue and Equifax is also aware of this with RBC.
No, I don't have any issue. I don't even see this student loan in my credit report. What's your interest rate?
Member
Jun 2, 2012
327 posts
311 upvotes
NORTH YORK
It is a good point to be aware of how the student lines are report to the credit bureaus.

I had an RBC loc that was ‘converted into a loan’ after graduation. However, this conversion is simply a change on RBC internal systems and externally/credit bureaus it still shows up as a line. Therefore, every loan payment reduces the balance, but it always shows up as a maxed line. The credit bureaus do show my regular loan payment as the last payment amount.

This reporting has meant that when I was looking for a mortgage I had to go to RBC and get them to write me a letter confirming that this is in fact a loan and confirm the payment amount. Because it is still reporting as a maxed out line the other banks were calculating tdsr based on a 3% of the balance as the minimum payment when in fact my regular loan payment was a fraction of the 3% calculation.

On the flip side RBC was the only bank that approved me without a guarantor and based simply on my credit score and post graduation earning potential .

So just something to keep in mind if looking for a mortgage/other lending and you have an RBC loc that has been converted to a loan.
Member
Sep 26, 2017
296 posts
202 upvotes
whether what op is saying is true or not, its always really important to keep tabs on credit scores! cibc preapproved me for a line of credit and cc. I saw both hit my Equifax report.. I honestly didn't even know what to do. call and scream? to get those inquiries removed, it would be such a hassle. im sure I could've done something about it, I even have the screen shot saying im preapproved but my score didn't drop by more than 5 points so its whateverrr
[OP]
Newbie
Dec 8, 2012
25 posts
10 upvotes
ETOBICOKE
gemenichic wrote: It is a good point to be aware of how the student lines are report to the credit bureaus.

I had an RBC loc that was ‘converted into a loan’ after graduation. However, this conversion is simply a change on RBC internal systems and externally/credit bureaus it still shows up as a line. Therefore, every loan payment reduces the balance, but it always shows up as a maxed line. The credit bureaus do show my regular loan payment as the last payment amount.

This reporting has meant that when I was looking for a mortgage I had to go to RBC and get them to write me a letter confirming that this is in fact a loan and confirm the payment amount. Because it is still reporting as a maxed out line the other banks were calculating tdsr based on a 3% of the balance as the minimum payment when in fact my regular loan payment was a fraction of the 3% calculation.

On the flip side RBC was the only bank that approved me without a guarantor and based simply on my credit score and post graduation earning potential .

So just something to keep in mind if looking for a mortgage/other lending and you have an RBC loc that has been converted to a loan.
This is exactly what happened to me. RBC said it is their mistake and they will write a letter to equifax. All those in denial, you are clearly wrong as RBC acknowleged their mistake.
Newbie
Jan 20, 2019
2 posts
1 upvote
Hi, I'm having this same issue with my RBC LOC...And I'm having a ridiculously hard time getting RBC to give me the letter that you got...All they keep sending me is a letter saying what amount I'm paying monthly, and that it's up to date. Whom did you contact to get a letter that clearly states that although it's listed as a LOC, it's actually a loan at this point, in repayment? It's really affecting our ability to get a mortgage...

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