Understanding what a credit report is and regularly checking your credit score is helpful in improving your credit IQ. The more you know about the different credit bureaus and how they calculate your score, the better. Having a basic knowledge of how to look at your credit report is extremely helpful in preventing bankruptcy. Learn more about credit reports, scores, and Canadian credit bureaus in the article below.
What is a Credit Report & Who Creates Them?
A credit report is a detailed history of your credit usage. Your credit report will be created the second you apply for credit for the first time. The lender that you chose to borrow from will then inform the credit bureaus of the information stored in your account. For instance, payment history, how long you’ve had credit, if you have any outstanding debts, etc.
Equifax and TransUnion are the two primary credit bureaus in Canada. These privates companies both serve to collect data from lenders about your credit experience. Each company stores and shares information about how Canadians use credit. Your credit report is then calculated based on your specific credit history using a special formula made by credit bureaus and lenders. However, they do not share these formulas with the public. Despite this, there are a few known factors that can either contribute to or hinder your credit score.
These include the following (in no particular order):
- Reaching your credit limit or coming close to your credit limit
- The type of credit you are using
- If you have any record of bankruptcy
- The number of credit applications you have
- If you are timely or tardy with your credit payments
- If you have outstanding debt
- How long each form of credit has been on your credit report
- The amount of credit debt you carry
- How long you have had credit
It is possible that your credit score will differ from lender to lender. Or, even differ from the score you received on your report. This is because some lenders will put more importance on certain information compared to others when coming up with your credit score.
When is Your Credit Report Used?
Your credit report is a valuable piece of information that is used in a number of scenarios. Credit bureaus have a specific set of guidelines to ensure the privacy of your credit report. There are only select people who will be able to view your credit report. These include financial institutions, car rental companies, credit card companies, phone companies, insurance companies, governments, employers, landlords, and retailers.
People may ask for your credit history in order to make decisions that may have to do with your financial situation. For example, a landlord may ask for your credit history if they are considering you for a rental property. Or, a car company may ask for your credit history to determine how risky it is for them to lend you a vehicle.
When a person or organization asks to check your credit, it is important to recognize that this will typically result in a hard inquiry. Too many hard inquiries (credit checks) on your credit report can lower your credit score and make you appear risky to lenders. This is because it can seem like you are desperately seeking credit or trying to consume more than you can afford.
Nova Scotia, Prince Edward Island, and Saskatchewan are the only provinces that only need to verbally tell you they are doing a credit inquiry. All other provinces require written consent to do a credit check.
What Information is Found in a Credit Report?
A Canadian credit report contains both personal and financial information. Personal info will include things like your name, birthday, SIN number, employers, phone numbers, etc. Financial information will include things like bankruptcy, credit you use, fraud alerts, bad cheques, etc. The credit portion of your report will contain information such as debts you owe if you go over your limit if you make payments on time, and other information. Your mortgage, internet, and mobile phone info and payment history can also show up on your credit report in some instances.
Why is Checking Your Credit Score & Report Important?
Your credit report is important because it can determine a host of other factors in your everyday life. For instance, whether or not you are accepted in a rental agreement. Or, whether or not you get a new job. There are countless scenarios where a good credit score and report are beneficial.
Lastly, you can use your credit report to determine fraudulent activity like identity theft. It is important that you check this annually to make sure no one has opened credit in your name. More information about preventing theft and fraud can be found in our credit education centre.
Learn more about everything that has to do with credit by visiting our credit education centre or contacting us today. We’d be happy to help you get back on your feet. Feel free to reach out with any questions that you have about credit or money management. We look forward to helping you achieve your financial goals by helping you with checking your credit score!