Credit History is indicated through your loans, credit card use and buy now, pay later scenarios. A good credit history enables you a future with credit! But a bad credit rating indicates you may be struggling to get out of debt.
You may need advice and debt help to possibly refinance your debts, set a realistic budget to meet your financial needs, and pay down your debt obligations. Options like a formal Consumer Proposal or filing for bankruptcy should be your options to consider only if your financial situation is in crisis. The actions you take will show up on your credit history and remain for a set period of time.
Credit-reporting Agencies, also referred to as Credit Bureaus, collect information submitted by banks, credit card companies and other credit lending businesses that reflect your repayment of these debts. This, in turn, establishes your credit history, your credit report and credit score.
Whenever you attempt to borrow money, lenders will use your credit history to determine whether or not your credit rating or credit score is in good standing in order to approve you for more credit. A poor credit score may result in a refused mortgage, personal loan, car lease or a landlord that refuses to rent to you. A poor credit score can also result in higher interest rate on credit cards. This information in your credit report can also be used by the government and employers.
The two major credit-reporting agencies in Canada are Equifax Canada and Trans Union Canada. Checking the information these companies have on file about you for accuracy is very important.
When applying for credit, the lender or organization checks into your credit history and it is recorded on your file as an “inquiry.” Lenders you already have give information to the credit-reporting agencies regarding your dealings with them and your bill payments.
What Is a Credit Report?
A credit report is the credit history summary of your payments on your debts like loans and credit cards and also how you are using your credit … responsibly or going over your limits. It is collected from your lenders and recorded at credit-reporting agencies like Equifax and Trans Union.
Credit Report FAQ’s
1. Who has access to my Credit Report?
You can access your Credit Report and you should review it at least once a year. Only certain companies or businesses can access your credit history if they request to do so or if you have given consent, for instance, to an employer, a potential landlord, when you apply for a loan, mortgage or credit card, if it is related to the collection of a debt or if you are applying for insurance.
2. What is in my Credit Report?
The content of your report contains the following:
- Personal Information – name, addresses, phone number, date of birth, driver’s license, passport, employers.
- Credit and Transactions – credit cards, loans, internet and mobile phone accounts, lines of credit and mortgages may appear. It shows when accounts were opened; amounts owing; if payments are made on time; if you missed payments and if you go over your credit limits.
- Banking Information – accounts including NSF, bad cheques and closed accounts due to money owing or fraud.
- Public Records – information on public record like Bankruptcy, credit related court judgements and liens on assets like cars and your home.
- Collection Information – when an agency pursues a debt for collection.
- Consumer Statements – about fraud alerts, identity verification and disputes.
- Credit Report Inquiries – from lenders or organizations who request your report.
3. How does the credit rating system work?
The credit rating system contains a combination of numbers from 1 to 9 and letters representing the type of credit obtained.
A rating of 1 is the best rating and means you make your payments within 30 days of the due date. 9 is the worst rating and means the lender has sent your file to the collection agency or you have filed a debt repayment plan, Consumer Proposal or Bankruptcy.
The letters used are explained as follows:
- “I” – you borrow a fixed amount of money over a fixed amount of time and repay it in fixed amounts on a regular basis as in a car loan until it is paid off.
- “O” – means open credit where you borrow as needed to a certain limit and the balance is due at the end of the period as in a line of credit.
- “R” – means revolving credit where you make varying payments based on the balance owing and you can borrow up to your limit as in credit cards.
- “M” – is a mortgage.
A payment chart shows your payments over the last 2 years.
A payment scale indicates the number of times you made a payment 30, 60 90 days after the due date.
4. What does a Credit Report look like?
Click on the links below to see samples of Credit Reports from Equifax and Trans Union.
What Is a Credit Score?
A credit score is a mathematical calculation based on the information about your financial situation at a specific point in time. It also indicates the risk you present to other lenders compared to other consumers. The better you are about paying your debts on time and in full the better the score.
Credit-reporting agencies use a scale from 300 to 900 where the higher the score the lower the risk for lenders to give you credit. Some lenders can also use your score to determine interest rates they will charge you on your issued credit.
Credit Score FAQ’s
1. What factors influence my credit score?
The following is a list of factors that can affect your credit score.
- Your payment history – balances carried from month to month and missed payments are a negative on your score. Make payments on time and in full if possible. If you can’t make payments contact your lender and work with them to pay the debt and it may not reflect negatively on you.
- Collections or a bankruptcy – action against you reduces your score. For example, if your account goes to a collection agency your score will drop.
- Outstanding debts – is your spending close to or above your credit limit? Stay within your limit and try to only spend up to 1/3 of the total credit you have been given by lenders. Lenders view you as a bigger risk the more credit you spend of what has been granted even if paying on time.
- Account history – how long you have had credit? Try to stay with one or two credit lenders as opposed to trying to acquire new credit as this is seen by lenders as high risk as well.
- Number of recent inquiries about your credit report.
- Types of credit you are using – mix of credit cards and loans.
- Do not withhold payment because of a dispute as the lender can report your payment as late.
2. How long do factors affect my credit score?
Click the link below to see how long your credit score is affected by you different types of credit transactions and history.
3. What does a Credit Score look like?
Click on the links below to see samples of Credit Score from Equifax and Trans Union.
How to Check My Credit Report and Score
You can request a copy from two credit reporting agencies like Equifax and Trans Union. You should request them at least once a year to verify all information and ensure there has not been any fraud. Review their websites to be sure you have all necessary information needed to submit your request.
To REQUEST your Credit Report, you can do so by phone, in person or in writing by fax or mail. You will need two pieces of I.D. so check with them as to which pieces they will accept.
To RECEIVE your Credit Report for FREE you must receive it by mail and not online as there is a charge for faster online service.
To REQUEST your Credit Score you can do so but there is a fee for this service.
TRANS UNION CANADA
National Consumer Relations
Consumer Relations Centre
P.O. Box 190, Station Jean-Talon
P.O. Box 338, LCD 1
Montreal, QC H1S 2Z2
Hamilton, ON L8L 7W2
1-800-465-7166 toll free
1-800-663-9980 toll free
Building or Rebuilding a Good Credit History
- Use credit cards wisely, making timely payments of full amounts due or at least the minimum monthly amount due;
- Pay bills on time;
- Contact creditors if you have trouble making payments;
- Check monthly statements for correctness;
- Check your credit report and credit score for accuracy once a year;
- Don’t accept credit until you know the terms, conditions and interest rates;
- Don’t go over your credit limits on cards;
- Use a ‘secured credit card’ if you can’t get a credit card. With this card you deposit a sum of money usually equal to the credit limit offered by the lender and then build a new history by making required payments on purchases and the lender will report this as a positive to your credit-reporting agency.
- A ‘prepaid credit card’ that you purchase from a store is different from a ‘secured credit card’. It does not establish credit and does not help your credit history as nothing is reported.