An excellent credit score allows you to access the best credit cards, loans and mortgages with attractive rates and rewards. But did you know that your credit score is calculated using information from your credit report?
In this guide, you’ll better understand Canadian credit reports so you can manage your finances better.
What is a credit report?
A credit report summarizes how you manage credit and your financial obligations. Credit bureaus, also known as credit reporting agencies, record your credit history.
Information on how you use credit, like credit cards and loans, is sent from lenders to your credit report, and other companies use it to make decisions about you.
Credit reports keep a comprehensive record of your financial history, including:
- Your name, address and date of birth.
- Your history of employment.
- Your credit history: credit accounts, transactions, balances, and missed or late payments.
- Defaulted or closed accounts.
- Debts passed to collection agencies.
- Banking information, including non-sufficient funds payments.
- Public records, such as court decisions, bankruptcies or a lien against your house or car.
- Inquiries from companies who’ve requested a copy of your credit report.
A credit report can help you:
- Understand how credit products and your financial behaviour affect your credit.
- Make better financial decisions.
- Take steps to improve your credit.
- Protect against identity theft and fraud.
What are credit reports used for?
If a company is considering lending money, extending credit, offering a mortgage, granting employment or renting a property to someone, they use a credit report to assess a person’s creditworthiness.
So many companies rely on credit reports to make decisions about you, so regularly check your credit report to ensure it’s accurate, especially when applying for a mortgage, credit card or loan.
Although lenders strive to report accurate information, errors can occur, so don’t just assume your report is correct.
Who can access my credit report?
There are rules on who can view your credit report and how they can use the information. If you give consent, your credit report can be accessed by:
- Credit unions
- Financial institutions
- Credit card companies
- Finance companies
- Utility companies
- Insurance companies
- Mortgage companies
- Government agencies
- Debt collection agencies
When you apply for credit, you consent for the lender or creditor to access your credit report to consider your application. Initial consent allows them access throughout the lifetime of the credit account. It also allows the lender to report account information to the credit bureaus.
A company must have a legitimate and permissible purpose for accessing a credit report, such as the extension of credit, employment, tenancy, insurance or debt collection.
Additionally, some provincial laws allow government representatives like judges and police to see parts of your credit report without your consent.
When a company looks at your credit report, it’s recorded in the inquiries section of your credit report.
In some parts of Canada, your credit score cannot be used to decide whether you qualify for insurance or to determine how much you will be charged for insurance coverage. Some provinces forbid insurance companies to use your credit score when evaluating your car or mortgage insurance application.
Some provinces also require companies to tell you if your credit report resulted in you being refused a benefit or service or if you have to pay more for it.
Does my credit report show my credit score?
Most credit reports contain your credit score. This is a number between 300 and 900 calculated using information from your credit report. Your credit score represents the likelihood of you paying the lender back.
A good credit score is typically 660 or higher.
What information does a credit report contain?
A credit report contains personal information such as your name, date of birth, Social Insurance Number (SIN), historical addresses, telephone number and your current/previous employers.
If you see another person’s personal information, it could mean that someone else’s credit information is linked to your credit report. If this is the case, report the error to the credit bureaus immediately.
Your credit history is included in your credit report and contains the following information:
Credit accounts are the types of credit you use, such as a credit card or a loan. Your credit report contains information about each credit account, including how long the account has been open, the balanced owed and whether you are within your credit limit.
Each account records whether you make payments on time, missed any payments, or if the debt was passed to a collection agency.
There are different types of credit accounts: revolving, installment, open and mortgage.
Installment credit involves making fixed payments over a set term. Examples include mortgages, car loans, student loans and personal loans.
Revolving credit describes products that you can reuse if the account is open and payments are made on time. Examples include credit cards, home equity lines of credit (HELOC) and other lines of credit.
Open credit refers to accounts you can borrow from up to a certain limit that must be paid monthly. An example is a mobile phone account, where you can make calls, send texts, and use data, but you must pay for these services at the end of the month plus any additional fees accumulated.
Mortgage information is recorded separately in your credit report. If you use a home equity line of credit (HELOC), it may be treated as part of your mortgage in your credit report.
Each credit account uses credit ratings to record payments made on time, late payments, missed payments, debts in collections and bankruptcies.
A letter is used to describe the type of credit:
- I: Installment credit (e.g. loan)
- R: Revolving credit (e.g. credit card)
- O: Open credit (e.g. a line of credit)
- M: Mortgage loan (e.g. mortgage for your home)
The number reflects the health of the account:
- 0: Too new to rate or not yet used.
- 1: Paid within 30 days of billing or paid as agreed.
- 2: Late payment: 31 to 59 days late.
- 3: Late payment: 60 to 89 days late.
- 4: Late payment: 90 to 119 days late
- 5: Late payment: more than 120 days late.
- 6: Code not used.
- 7: Making payments through a consolidation order, orderly payment of debts, consumer proposal, debt management program or a credit counselling agency.
- 8: Repossession.
- 9: Written off as a bad debt, sent to a collection agency or included in bankruptcy.
Any number higher than 1 lowers your credit score. The worst rating you can have is 9.
Paying bills within 30 days of the billing date will help you achieve a strong credit score.
If you don’t make payments on time, a higher number code will be applied, negatively affecting your credit score.
If you pay a credit card bill on time, it’s reported as R1.
If you pay a loan installment 50 days late, it’s reported as I2. If you have a credit card debt with a collection agency or file for bankruptcy, it’s reported as R9.
Payment history appears on your credit report for six years from the date reported. Late payments remain on your credit report even if you pay the overdue balance.
Any credit account that was closed due to an overdue balance may appear on your credit report for up to six years from the date of your final payment.
Chequing and savings accounts closed “for cause” due to money owing or fraud committed appear on your credit report for up to six years.
Although banking products like chequing and savings accounts don’t benefit your credit score, they will damage your credit score if your account is sent to a collection agency.
The credit inquiries section lists any company that requests a copy of your credit report in the past three years. This means that they’ve performed a credit check.
There are two types of inquiries — hard and soft.
If you’ve applied for credit, a hard inquiry will occur to help lenders decide on your application. Hard inquiries can impact your credit score and remain on your credit report for three years from the inquiry date.
Too many hard inquiries on your credit report can alarm lenders because it appears that you’re desperately looking for credit.
Soft inquiries are different because they are non-credit-related inquiries. An example of a soft inquiry is when an existing lender uses the information on your credit report to check if you qualify for a promotion, credit limit increase or service. Insurance companies and credit bureaus also use soft inquiries.
Soft inquiries do not affect your credit score and are not visible to anyone but you. They can take place without your permission.
When you check your credit score, this is a soft inquiry.
How many credit inquiries are too many?
Too many credit inquiries in a short space of time can damage your credit score.
Multiple applications for the same type of loan (car loans, mortgages or student loans) made within a short period (14 to 45 days) are combined. Although all inquiries appear on your credit report, only one impacts your score.
Every credit card application involves a hard inquiry, which will damage your credit score.
Before you apply for credit, find out if the type of credit will be treated as a single inquiry.
The public records section of your credit report holds pieces of financial information that are also on file with the government and accessible to the general public.
Collections occur if you fail to make payments towards a credit account. The account can be charged off by the lender and passed to a collection agency. Collections stay on your credit report for six years.
Public records appear if you declare bankruptcy or enter into a debt relief program such as a consumer proposal, credit counselling, voluntary deposit, or an Orderly Payment of Debts.
If a court issues a judgment against you or a lien against property such as your home or car, this information will be recorded in the public records section.
The special services section contains a record of any company performing a soft inquiry to locate you using the personal information in your credit report.
You can add a consumer statement to your credit report to explain the circumstances surrounding your credit history.
For example, if you have some late payments for a credit account, you may want to tell lenders why this happened.
Why is this important? Instead of lenders only seeing the late payments, it allows you to clarify why it happened so that they can consider this when reviewing your credit.
This statement can be seen by any company that receives a complete copy of your credit report. However, you can remove a consumer statement at any time.
Identity alerts encourage lenders in Canada to verify your identity before issuing credit. The process allows you to add a personal statement and phone number to your credit report. In some provinces, such as Manitoba and Ontario, this alert requires lenders to call you before extending credit.
Fraud alerts are available to confirmed victims of fraud or identity theft. Like identity alerts, a statement can be added to your credit report to encourage — but not legally require — lenders to call you before approving credit. Fraud alerts stay on your report for six years.
Who creates my credit report?
There are two major credit bureaus that create credit reports in Canada: Equifax and TransUnion.
Both companies collect and share information about how you use credit. They sell credit reports to banks, financial institutions and other companies so that these organizations can make decisions about you.
How often is my credit report updated?
Your credit report is typically updated at least once every 30 days. Lenders provide these updates by reporting new information, such as balances and payment activity, to the two main credit bureaus — Equifax and TransUnion.
Some lenders are more frequent than others and may report information multiple times in any given month, so check your report regularly.
How to check your credit report for errors
It’s crucial to check your credit report for errors to ensure your credit score doesn’t drop, resulting in you being turned down for credit.
Pay particular attention to things like:
- Incorrect personal information, such as the wrong date of birth or address.
- Misspellings of your name or address.
- Accounts that don’t belong to you.
- Unfamiliar accounts or credit inquiries (which could be a sign of identity theft).
- Payments made on time but recorded as late.
- Inaccurate credit limits.
- Accounts attached to debt collection agencies.
- Closed accounts reported as open.
- Negative information that hasn’t fallen off when it should have.
Fixing errors can result in a significant improvement to your credit score. Your credit score isn’t affected when you check your own credit report.
How to dispute an error on your credit report
If there’s an error on your credit report, file a dispute with the credit bureaus if you spot an error.
You may need to provide receipts, statements or other evidence to support your claim. It’s also a good idea to contact the creditor who made the mistake to inform them.
Upon receiving your dispute, the credit bureau will check your claim by liaising with the lender that reported the information to them. This review takes around thirty days.
If it’s established that there’s is an error, the credit bureau will update your credit report.
If you are not satisfied, you can add a consumer statement to your credit report to explain the circumstances surrounding the issue so that future lenders can consider this when reviewing your credit report.
Check your credit report for fraud
If your credit score suddenly drops, access your credit report and look for anything suspicious such as accounts that you didn’t open or balances that aren’t correct. If you find any suspicious activity, report this to both Equifax and TransUnion.
After you’ve done so, review your statements and bank account activity for suspicious transactions. If you find any, alert the lender and your bank immediately and cancel the affected card. You should update your online credentials if necessary.
Then, contact the police and report the incident to the Canadian Anti-Fraud Centre.
How to set up a fraud alert or fraud warning
If you are the confirmed victim of fraud or identity theft on your credit file, regularly monitor your credit report and set up a fraud alert on your account. Fraud alerts encourage but don’t legally require lenders to call you before approving credit applications.
Set up a fraud alert with Equifax or TransUnion:
How to set up an identity alert
Regardless of whether you’ve been a victim of fraud or not, you can add an identity alert to encourage lenders in Canada to verify your identity before issuing credit. In some provinces, such as Manitoba and Ontario, this alert requires lenders to call you before extending credit.
Set up identity alerts with Equifax or TransUnion:
Frequently asked questions about credit reports
What is a credit bureau?
Credit bureaus, also known as credit reporting agencies, collect and store information about your credit use and financial history. Lenders and other companies provide this information. It’s a credit bureau’s task to compile the data and build a credit file from it.
Is my entire credit file on my credit report?
Not all companies report their accounts to credit bureaus for many reasons. Therefore, a credit report might not be a complete record of your credit and financial history. TransUnion and Equifax may hold credit files with different information.
What does a charge-off mean on your credit report?
A charge-off means that you had an account with the creditor, but you have missed a payment, and it has been at least 120 days since you made the last payment. Asa result, it has been closed and written off as a loss.
Charged-off accounts stay on your credit report for up to six years from the date of the first missed or late payment on the charged-off account.
If you pay the debt, it will be updated as a paid charge-off. If the debt was passed to a collection agency, then it may show as a paid collection.
If you have a charged-off account, contact your creditor or lender, who may be open to negotiating a payment plan or settlement.
Knowing what’s on your report is that it allows you to improve your credit score, giving you access to better credit cards, loans and mortgages with attractive rates and rewards.
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