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Equifax Canada and TransUnion Canada are the two main credit bureau companies in Canada. When you make an application for credit for the first time, Equifax and TransUnion will create a credit report in your name, track your credit history and share information with lenders and other third parties such as future landlords and employers, on how you use (or misuse) credit. Equifax and TransUnion will use this information to create your credit rating and your credit score. The good news is that the Canada Revenue Agency (CRA) is one creditor who does not communicate or share information with Equifax or TransUnion on how much you owe to the CRA or whether you have been making payments on your tax liability.
If you have a credit card, Equifax and TransUnion will report a credit rating ranging from R0 (credit approved by not used therefore too new to rate) to R9 with R1 being the best and R9 being the worse. Credit scores range from 300 to 900 points with the best score being 900 points. For instance, if you have been paying your credit card on time each month, it will be reported at an R1 on your credit file and if you have missed payments, it will be reported as R2, R3 etc. A lender will use information reported on your credit report to determine whether or not they will issue credit to you and in some cases, a lender will use your credit rating and your credit score to determine what rate of interest they will charge you. The higher your credit rating and credit score, the lower the risk you are to a lender and this will put you at an advantage when you seek an additional credit or for lower interest rates.
The Office of the Superintendent of Bankruptcy (OSB) contains a public record of all bankruptcies and Consumer Proposals filed in Canada. If you have filed for a bankruptcy or a Consumer Proposal in Canada, Equifax and TransUnion will also disclose a record of your bankruptcy or Consumer Proposal on your credit report.
Equifax and TransUnion will keep information on your credit file for the maximum period allowed by provincial laws. In the province of Ontario, if you are a first time bankrupt, Equifax will keep a record of your bankruptcy on your credit file for a period of six years from the date of your discharge. For second or multiple bankruptcies, a record of your bankruptcy will be reported on your credit file for a period of 14 years from the date of your discharge for each bankruptcy filed. TransUnion will keep a record of first time bankruptcies for a period of seven years from the date of discharge.
In the province of Ontario, Equifax will keep a record of a Consumer Proposal for a period of three years from the date of full performance of the consumer proposal. TransUnion will keep a record for a period of six years from the date of filing the consumer proposal or three years from the date of full performance of the consumer proposal.
It is imperative that you are aware of the information reported on your credit file. It is advisable to obtain a copy of your credit report at least once a year to ensure that it is accurate and free of identity theft. For instance, a credit card appearing on your credit file that you did not request may be a sign of an error or a sign of identity theft. If there is an error on your credit report, you can request an investigation from the respective credit bureau by completing and submitting an investigation request form to the credit bureau indicating the error that needs to be investigated. The credit bureau will investigate the matter and make the necessary correction. The earlier you discover errors on your report, the easier it will be to have the errors corrected or entirely removed from your credit file.
One good way to rebuild poor credit after a bankruptcy or a consumer proposal is to apply for an unsecured credit card, use the credit card for purchases you would have normally paid for in cash or by debit, and make payment to the credit card on time preferably paying off the balance in full. You should not be paying less than the required minimum as per the credit card statement. If you cannot obtain an unsecured credit card, consider applying for a secured credit card by providing the issuer with a security deposit equal to the credit limit on the card. If you opt for a secured credit card, you should confirm with the issuer that the credit card will be reported at the credit bureau(s) in the same way as an unsecured credit card otherwise use of the credit card will do nothing to help you rebuild your credit. If you are offered or opt for a prepaid credit card, be aware that a prepaid credit card is different from a secured credit card. A prepaid credit card will not help you establish or rebuild credit as prepaid credit cards are not reported at the credit bureau(s). However, a prepaid credit card can be helpful for the purpose money management and budgeting for expenditures.
Other ways to rebuild poor credit include: avoid maxing out on your credit card(s), use open account(s) from time to time to keep them active, avoid late or missed payments, avoid withholding payments to a lender due to a dispute (i.e. pay the debt first and dispute the matter later) and limit the number of times you apply for credit and the number of inquiries you allow on your credit file. Too many inquiries on your credit file may appear to credit grantors as if you are living beyond your means and robbing Peter to pay Paul or that you may be working on a “bust-out” or planned bankruptcy.
Mary Plahouras holds a Master of Laws in Bankruptcy and Insolvency Law from Osgoode Hall Law School and is an Estate Manager at MNP’s Toronto and Markham locations. To learn more about how MNP Ltd. can help you, contact our local office at 416.515.3921 or visit
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*310-DEBT doesn’t operate in MB, NW ON and QC.
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