Have you ever requested a copy of your credit report? Many people I know never have and aren't even sure what it is or how to get one. Which is unfortunate, because your credit report is one of the most important financial documents you can access. Its contents – and especially the accuracy of those contents – have the power to make or break your status as a borrower.
From what it includes and why it's important, to how you can request a copy of your own credit report, this is everything you need to know to gain a better picture of your overall debt-health today.
What is Your Credit Report?
You can think of a credit report as the Wikipedia page on your borrowing history. Simply put, it is a historical summary of how you use credit – from credit cards to personal loans, lines of credit and even retail "buy now, pay later" offers. Your lenders send information about your accounts to both of Canada's credit reporting bureaus, TransUnion and Equifax. This information is then summarized and made available for you or anyone authorized to review it.
What's Included in Your Credit Report?
Aside from your demographic information such as your name, address, gender and marital status, your credit report contains a breadth of information about all your sources of credit – ranging from accounts that are currently active to loans that have been paid off and credit cards that have been cancelled. This will include:
- When you opened the account
- What your credit limits are
- How much you currently owe
- Whether you make payments on time
- Whether you've missed payments
- Whether you go over your credit limit
In addition, your report will include other important information and matters of public record that lenders generally consider before granting you credit, such as:
- Court judgments against you
- Bankruptcy or Consumer Proposal filings
- Secured loans such as a mortgage or car loan
- Accounts referred to collections agencies
- A list of anyone who has inquired about your credit report (e.g. credit card companies, banks, landlord and yourself)
Credit Score
Also included with your credit report will be your credit score. In Canada, this number ranges anywhere from 300 to 900 – with a higher score representing a greater level of credit worthiness. Your credit score is calculated using a formula which considers several data points throughout your credit report. For every action that demonstrates you can use credit responsibly – such as consistently making payments or using less than your full credit limit – you are awarded with points. For every action that indicates you have difficulty managing credit – such as missing payments – you are penalized by losing points.
As such you can expect your credit score to constantly fluctuate but as a general rule, you want to make sure it stays above at least 650 to qualify for most standard loans.
How Does Your Credit Report Affect You?
Here are some examples of the financial effects of your Credit Report
- Whenever you apply for new credit your Credit Report and Credit Score is one of the first steps the lender will take in assessing whether to approve your credit application.
- If, for example, you are applying for a lease for a new apartment, most landlords will do a credit check by reviewing your Credit Report. If your Credit Score is below the landlord's acceptable level or is just lower than another prospective tenant for the same apartment you may lose out.
- If your Credit Report contains one or more errors, which is not uncommon, your credit application may be rejected simply based on inaccurate information. Hence the importance of obtaining your Credit Report (from both Equifax and TransUnion) and reviewing it carefully at least once per year. And of course, report any errors to them and follow-up to ensure they are corrected.
- While your Credit Score is an important factor that lenders will look at in deciding whether to approve you for credit, they may also consider other factors, such as your income, job and any assets you own.
- Regularly reviewing your Credit Report also helps you better understand how your use of credit is affecting your Credit Score so you can take steps to change any actions that may be quietly lowering your Credit Score.
More information on Credit Reports and Credit Scores, including how to order your Credit Report, can be found on the Government of Canada's website at https://www.canada.ca/en/services/finance/debt.html .
If you're struggling with debt and worry about how missed payments or collection activity are negatively affecting your credit report, we can help. Call us today for a no obligation Free Confidential Consultation with a Licensed Insolvency Trustee. We'll help you review your financial situation and determine whether a Life Changing Debt Solution may be right for you.
