What is a Credit Report in Canada?
Financial institutions use credit reports to see how responsible a person is borrowing money and paying it back. Your credit report constitutes information like the kind of credit you use, the regularity of your payments, if you have ever come across financial fraud, collection agency remarks, inquiries from lenders who have requested your report, financial situations that led to bankruptcy and any court confirmations against you relating to credit.
Additionally, your credit report contains details about how you use credit. For example: how much money you owe on your credit accounts, how frequently you pay back creditors, any missed payments and if you’ve ever been over your credit limit.
A credit report is a major tool that lenders use to see if you’re responsible enough to borrow money. As your credit score is seen as a precise judgement of your financial health, it’s a good idea to assess your credit report. Credit reporting agencies, Equifax Canada and TransUnion Canada, rate an individual’s credit score between 300 – 900 based on one’s financial history. A low score poses a potential risk for lenders.
Huffington Post bears that the average Canadian has a credit score ranging around 600, and any number that falls at or over 700 are considered very good. However, when looking at your credit report, don’t stall at your credit score. There are other important numbers to be taken into account.
What are Account Ratings on a Credit Report?
Credit reporting agencies can consider your credit history for up to 7 years. They typically evaluate the items on your report on a scale of 1-9. These numbers are a part of a code that are beside your line of credit on a credit report, and they show lenders if they can trust you with paying back debt.
The number “1” indicates that you always pay your bills within 30 days of the due date, whereas the number “9” tells creditors that you were unsuccessful paying your bill. It can also suggest that you’ve filed for a consumer proposal for paying everything back.
There are some letters on your credit report too, which appear before the numbers 1-9. These letters on your credit report convey the type of credit that is on your report. Here’s what they mean:
- “I” stands for Installment Credit on your credit report showing lenders your financial history for an installment loan. One pays these kinds of loans in fixed amounts, just like a car loan.
- “O” is Open Status Credit. In other words, it means that you have a line of credit open up until a limit is reached. The balance for these loans are to be paid by the end of each period, like a student loan.
- “M” stands for Mortgage Loan.
- “R” is Revolving or Recurring Credit allowing you to make regular payments in different amounts depending on the balance of your account. You have the ability to borrow money up to your credit limit, like a credit card.
A credit file is initiated when a person receives their first type of credit. For many Canadians, this might mean opening a revolving credit account (ex. credit card) or installment credit (ex. student line of credit). Having a low credit score or poor credit history can impact your life seriously. The first step to recover your credit is understanding how your credit report demonstrates your financial behaviour and fixing the low account rating on your report.
Familiarizing yourself with your credit report is crucial and requesting a copy of your credit report from one of Canada’s two major credit bureaus or credit reporting agencies in Canada, Equifax Canada and TransUnion Canada. There are also other free credit report in Canada online as well.
If you need help with building your credit strategically by unloading your debt, or if you need to know how to get free credit report in Canada, contact our credit specialists at Canada Auto Experts today at 1-855-550-5565 to see how we can help!