What is a Credit Report?

A credit report is a history of how consistently you pay your financial obligations over time. It is created when you first borrow money or apply for credit.

The companies that lend or collect money or issue credit cards (banks, finance companies, credit unions, retailers, etc.) send credit reporting agencies specific and factual information about their financial relationship with you. Details, such as when you opened up your account, timeliness of your payments and if you have gone over your credit limit are shown in full.

Although this information is confidential, you have the right to see your credit report and no one else can have access to the information in the report unless you allow it. Typically, when you apply for a loan, a credit card or even a mortgage you will need to allow this organization to check your credit history.

The credit report summarizes information about the different types of accounts you have. It will include the following account types:

  • Revolving accounts, like credit cards and lines of credit
  • Installment accounts, like loans
  • Other accounts, such as cell phones
  • Collection accounts

There are many ways to order your credit report. The easiest and safest method is by internet through a credit-reporting agency such as Equifax or TransUnion Canada.

When you receive your credit report and score, it’s important to make sure that the information in the report is correct. If the score is lower than you thought, read the report carefully to find out which factors are most likely having a negative influence on the score, and then work to improve them.

Check your credit report at least once a year for errors and signs of identity theft. Think of it as an annual checkup for your financial health. You have the right to dispute any information on your credit report that you believe is wrong. You can ask the credit reporting agencies to correct errors. It’s free.

What to watch out for:
  • mistakes in your personal information, such as wrong mailing addresses or incorrect date of birth
  • errors in credit card and loan accounts, such as a payment you made on time that is shown as late
  • negative information about your accounts that is still listed after the maximum number of years it is allowed to stay on your report
  • accounts listed that you never opened yourself, which could be a sign of identity theft.

 

Why do errors matter?

They may give lenders the wrong impression. You could be turned down for an application or receive a lower credit score than you should have. Even errors that seem minor, such as a misspelled name or a wrong address, could cause problems when you apply for credit.

Watch out for “credit repair” companies that claim they can eliminate negative information, for a fee, before the date it would normally be removed from your credit report. This is not possible.

Tips to Remember to Help Improve Your Score:
  • Make sure you have a credit history: you may not have a score because you do not have a record of owing money and paying it back. One way to build a credit history is by using a credit card.
  • Always pay your bills on time
  • Don’t go over 50% of the credit limit on your credit card
  • Apply for credit in moderation

The actual formulas used to calculate credit scores are the property of private companies and are not available to the public. This means it is not possible to know exactly how many points your score will go up or down based on the actions you take.

Here are the main factors that are used to calculate your score:
  1. Payment history
  2. Use of available credit
  3. Length of credit history
  4. Number of inquiries
  5. Types of credit

For more information, visit the Financial Consumer Agency of Canada.

To order your credit report, you can go to www.equifax.ca or www.transunion.ca.