5 Minute Guide to Your Credit Report and Credit Score

Do you know your score? When you're looking for a loan do you know how well you'll score with lenders before setting foot in a bank?

If you're like many Canadians, chances are you've never requested a credit report or seen your credit score. In a recent survey, the Financial Consumer Agency of Canada found that only 15 percent of Canadians have requested a credit report, while only 24 percent know their credit rating. Startling numbers when you consider the vital importance of this information to your financial health. Here's a quick guide to your credit report and credit score.

What is a Credit Report?

A credit report is a "snapshot" or profile of your credit history. It shows how often you pay your financial obligations, if you miss credit card payments, or if you've gone over your credit limit. Your credit report contains these details about you:

• Personal: Your name, current and previous address(es), Social Insurance Number (SIN), current and past employer(s), date of birth.
• Credit: Any credit you have -- such as a credit card, line of credit, a loan, or a mortgage.
• Banking: Any accounts you have, history of non-sufficient funds (NSF).
• And more: Any bankruptcies, collection agency interactions, or credit report inquiries made by yourself or a lender.

A credit report is created when you first borrow money or apply for any form of credit. Over time, your banks, credit unions, and retailers send updates to credit reporting agencies about your payment habits. This information is documented in your credit report and can be made available to lenders, landlords, and employers when you're applying for credit, housing, or a job.

What is a Credit Score?

Your credit score is a number between 300 and 900. Higher numbers show you're very credit worthy while lower numbers indicate a credit risk to lenders. Most Canadians don't know their credit scores, but finding out this information can help you significantly. If you have a high score, you can use it to negotiate lower interest rates on loans. On the other hand, finding out you have a low score gives you the opportunity to improve it before dealing with lenders.

Check out this handy Loan Calculator so see how higher interest rates can cost you!

So what's a good credit score? The majority of Canadians score between 700 and 850 which is considered to be a very good credit risk.

Checking Your Credit Report and Credit Score

It's a good idea to request a copy of your credit report once a year to verify the correctness of your personal and financial information. Checking your credit report can also help protect you against identify fraud since you'll see any unusual credit activity on your report.

In Canada there are two major credit reporting agencies, they are: Equifax (www.equifax.ca) and TransUnion (www.transunion.ca). Both agencies will mail you your credit report for free, or you can request to see it online for a fee. Obtaining your credit score from either agency costs around $25 and must be done online. Doing this also gives you access to your credit report.

Your Turn: Have you ever checked your credit report or found out your credit score? Were you surprised?

Comments

[Karl]

An apartment management company in Toronto reported to a collection agency that I owed them $800. When I moved out of the building I was told that I owed them nothing and my last months rent will be adjusted with the deposit I had paid. Upon investigation I found out that the check I had given as last months rent was used as 2nd months rent by their accountant.Is it right for them to report this accounting error as my fault? It has affected my credit score and now stands at 660

[Paul]

M. Soucie...to answer your question, yes, you can have different scores with the two credit reporting agencies. I have seen an almost 30 point differnce between the 2

[D.Jett]

Message for A McLean.

Not sure why your report was still showing bad debt from the 80's. The debt usually disappears (falls off) after 6 or 7 years depending on the credit reporting company (Equifax or Trans Union). Usually when it falls off you have a clean slate just don't go back to the same company that you made a mistake with the first time. No one will ever know you had the debt once it falls off. I know this as I had a friend that worked at Equifax and gave me the ins and outs. I'm slowly learning the secrets and they seem to work but again not sure why yours is still showing. You should do some research and find out. I know you have to jump through hoops to clear your name but write a letter to the company misrepresenting you and copy the credit bureaus on it as well. This is your first step. Another secret I learned was if you have a bad debt and you continue to pay it, it'll stay on your credit bureau. As soon as you make a payment, the 6 or 7 year drop-off resets itself from the day you decided to pay or agree to pay a lump sum. Also the agreements you make with companies to pay a lump sum lower than what the debt is for, there's a special code they use on the bureau to show you made a "deal" and that's not always good as well. It really depends. I also found out that if you don't pay a credit card debt for awhile, the bank will hire a third party company (usually a collection agency) however they will sell your debt for a lower amount and write-off the difference. Now the collection company will come after you for the full amount of the original debt eventhough they bought the bank debt for thousands of dollars less. Essentially the bank loses and the collection company wins and that is why many collection agencies are willing to make a "deal" as they really don't lose and make it look like they are doing you a favour. If they end up collecting the original full amount of the debt, then they really win. If you really want to pay your debt and you are dealing with a collection agency, try to make a deal with the devil. Try not to pay the full debt amount.

I hope all this makes sense. :-)

[McClure]

When I was 20 years old a banker at CIB* actually told me to let her fill out a form that would automatically approve me for credit that I would never get approved otherwise. Unfortunately I listened to her. Sure enough I was awarded huge credit that day and soon had more gold level credit cards than my friends parents had. I had accumulated about $70,000 in debt over the next couple of years without buying a house or any good investments. This was 10 years ago. I had so much credit and absolutely no idea of the true value of a dollar. To make a long story short I got into a heap of trouble and had a very hard time paying off credit cards and a car loan. I did take responsibility for my foolishness and repaid my owed debts to my many wreckless and irresponsible creditors over the next 6 years. I thought this ruined my life but sure enough I bought my first house last year and am getting approved for credit cards again- I have learned a very important lesson. I got my new start by applying for a $1300 Capital One card but I had to pay a refundable $75 collateral fee to first get one. If this worked for a mess like me it should work to help others as well. Good Luck

[Shortsassy]

To add to this blog; I am a victim of a credit report mix up. My information was conjoined with another person with the same name as I and who lives in the same town yet we have no idea who one another is or even related. Yet her credit rating on her own is VERY BAD and she is benefiting in my good status being placed incorrectly on her report. It is a mess for me and and has taken me weeks to fix. I guess key punching errors can happen and when credit cards or financial institutions put in the information they "assume" the name that comes up is the person they are looking for and don't double check, SIN number, birthdate or phone number etc. If my story can be of any help to anyone I would suggest when you apply for credit that they mnake sure they bring up the correct report of the correct person.

[Steve]

Jackofftrades is right. i agree with him. im one of the bad ones whos had bad cred and having to re-build but how is someone to know about bad past. i wouldnt want to lend money to some idiot just becuase they asked.

[Chris]

Sorry my comment was directed at Jack(off)OTrades.

[Chris]

About the comment below: Can someone say douchebag?

[The Credit Reporting Act]

Read the legislation in place within your province. A Credit Reporting Act limits how long a bad debt can be reported and permits you to challenge any incorrect information. If you have trouble with the credit bureau refer your concern to the provincial regulator.

[JackOTrades]

Stop complaining, pay your bills and you'll be fine. Without a system in place, how else would you expect somebody to potentially lend you hundreds of thousands of dollars? Do you want them to call your mom and ask her if you're good for it?

[Huggy1]

How do I get my Credit Score, not just a report?

[Dave]

Well I did a don't pay a cent event at the Brick as soon as you qualify the credit company they use gives you a Brick Card. I fell on hard times lost my Job and couldn't pay for the purchase before the year was up I was in debt to them for 2500 well I got employment and for 8 months was paying between 200 -400 bux a month or roughly 2000 dollars well my ballance went from 2500 to 2000 in those 8 months.Then I had to go bankrupt for personal reasons I wasn't upset about the Brick being thrown into that mix.
Well I was trying to get credit a few Years Later and was having a hard time well the credit agency who I had to inform a couple of times before that they were no longer a creditor was all the time reporting me as unable to locate and not paying the debt they purposely screwed me over and over with the credit reporting to make it difficult for me to increase my credit.The repoting time was finally up was the only way they were erased its credit companys like that that abuse their power should be addressed by the Gov't and forced to pay a Fine for impropper reporting but they get away with it.

[Giliana]

Yes, one's score can vary between the two reporting agencies, as different companies report to a specific agency, rather than both, simultaneously. One can sign up for monthly monitoring, which costs around $15, and grants one access, at any time. I subscribe to this, as I prefer to keep on top of things, i.e., to see whether there are any unauthorised credit checks, to see whether anyone else happens to have applied for credit, in my name, etc. One may feel the system is unjust, but it's as it is. It is used when one applies to buy, rent, perhaps when one applies for employment, etc. Best to try to improve matters, as one never knows when one will unexpectedly require a credit check, for a variety of reasons. Besides which, it does one good, to see a gradual improvement/increase in one's score. I was off work, ill, for a year in 2000, for a year, during which time I had a difficult time making ends meet. This was reflected in my score, which is now in the good range, so don't feel discourged.

[bill]

very unfair system

[Shameer]

I have, and I found the company I included in a consumer proposal, was still reporting the debt, which means I was going to have the same score the rest of my life. This company is CIBC by the way, so don't bank with them. Now I have to start jumping through hoops here.

[M. Soucie]

Since Kerry indicated there are two credit rating agencies in Canada, it would have been useful for her to have noted whether your credit score could differ with each agency or both would be the same...if they are different, it then means that one would have to pay two fees to find out one's score. Kind of important information for an "information" piece, I would think?

[walter markin]

What`s my score

[A McLean]

What is the credit score of Fanny and Freddie Mac? Bear Stearns? Bernie Madoff? The US or Canadian governments? The credit system is another control mechanism for the people of power. Our corporate, money oriented societies are comig undone - the final chapter won't be pretty.

[george]

Your credit report is a huge scam,information is held onto for years and used against you when needed.Reasons for late payments(sickness,divorce etc) are not recorded and only the bad info is collected.I recently recieved a copy of mine and credit card and other items from the early 1980's was there.Also these companies wont correct information that is incorrect with out jumping over many hurdles but miss a payment or two and your rating will slip.Credit rating are used to judge peoples character such as when trying to rent an apartment.This is a terrible system