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Getting Your Annual Credit Report in Canada
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Your credit report is an important part of your financial livelihood. In its own way, your report resembles your medical records. Except in this case, instead of your ailments, vital signs, and prescriptions being on file, your credit usage from the last 6 years is listed. And, just like going to your physician for regular checkups is an essential part of staying healthy, getting an annual copy of your credit report is key for maintaining your financial stability. While it might seem like a bit of a chore to order your credit report and review it, trust us, it’s beneficial in a number of different ways. Being that you are entitled to one free copy of your report per 12-months from both of Canada’s two credit bureaus, Equifax and TransUnion, what’s the harm in being absolutely certain that your credit is in good shape?
For a more informative explanation of credit score ranges, click here.
What is a Credit Report and How Do I Get a Free Annual Copy?
As we just mentioned, your credit report is essentially a detailed file that lists every instance of your credit usage within the last 6 years. However, certain events, such as second bankruptcies will remain there for longer (while your first bankruptcy will show up on your report for 6 years, a second bankruptcy will stay there for 14 years!)
For ways to rebuild your credit after a bankruptcy, read this.
So, if you’ve ever used a credit card or applied for a line of credit or loan of any kind, the company that you’re applying with will report that activity to one of Canada’s credit bureaus, who then compiles a report of all your information. In fact, as soon as you get your first credit-related product, you’ll have a credit report. Included within your credit report will be certain personal information, such as your:
- Full name
- Date of birth
- Telephone number(s), personal and work
- Social insurance number (SIN)
- Driver’s license information
- Passport information
- Employment history
Following your personal information will be a list of all your credit-related information, such as:
- Credit accounts and transactions
- Service accounts, cell phone, internet, etc.
- Black marks, NSFs, fraud, etc.
- Bankruptcies and or consumer proposals
- Legal judgments
- Accounts in collections
- Credit pulls
- Fraud alerts
After your credit report is created, not only will every instance of your credit usage be listed within, but every account you have active with whatever credit provider you’re dealing with will have a separate section reserved for it. Each of these accounts is then given a letter and a number to identify it.
The Letters identify the type of credit that the account relates to:
- I = Installment Loan
- O = Open Status
- R = Revolving
- M = Mortgage
The Numbers signify the rating the account given in accordance with how you’ve been managing the account, 9 being the most unfavorable:
- 0 = too new
- 1 = paid off on time
- 2 = late by 31 – 59 days
- 3 = late by 60 – 89 days
- 4 = late by 90 – 119 days
- 5 = late by over 120 days
- 6 = not used
- 8 = in repossession
- 9 = sold to a collections agency or in bankruptcy
The way you manage your credit products has a significant impact on your overall credit rating and in turn, your credit score. In correspondence with the numbers above, simply put, the lower the number is on that particular account, the better your credit rating will be, and the higher your credit score is. Since your credit rating and score will affect both your ability to get approved for loans in the future and the interest rates that come with them, it’s extremely important to be as prudent as possible when it comes to managing your credit accounts.
Getting Your Free Annual Copy
So, if you ever want to review your credit report, you need only request it from one of the credit bureaus (Equifax or TransUnion). All credit users are entitled to one free copy of their report per year. Although it’s never a bad idea to check your report more than once per year, any additional requests will require a small fee. To obtain your free copy, you can fill out the required document from either Equifax or TransUnion. You can then send your request by mail and your copy should arrive in 2-3 weeks. It’s important to know that with either bureau, your credit score is not free and needs to be requested separately.
If you wish to have an instant copy of your report and or credit score, you can also sign up on either bureau’s website. However, both bureaus do charge a fee for this service:
- Equifax: $15.50 for your report alone and $23.95 for your report with your credit score included.
- TransUnion: $14.95 for your report alone and $22.90 for your report with your credit score included.
For a more detailed article about how to obtain a free copy of your credit report, click here.
Consider Paying For Credit Monitoring
For an additional price, both TransUnion and Equifax also offer a credit monitoring service. This service is an extra security measure that credit bureaus have in place so their clients can regularly monitor their own credit reports from wherever they want. The system will send you regular updates and notifications, allow you to track your credit related transactions, and even check your credit score. The service will also alert you if and when a new credit account is open in your name, making it easier to detect any cases of identity theft or suspicious purchases and giving you time to inform both your lenders and your credit bureau.
What is a Credit Score?
Your credit score is a three-digit number, ranging from 300-900, that goes up and down in accordance with your credit habits. This means that with every timely payment or other positive credit transactions you make, your credit score will rise. For every late or missed payment or other negative credit transactions you make, your score will drop. Your score acts almost like your grade-point-average and lenders use it to determine your creditworthiness. The majority of the time, whenever you apply for a new credit product, the provider will look at your credit score before deciding to approve or deny you for that product. Obviously, the higher your score is, the better your chances of getting approved will be and the better interest rate you’ll receive for your payments.
All that being said, your credit score is definitely not the only thing that lenders look at when considering you for new credit. Other aspects of your credit report, such as your payment history and employment, will also determine your creditworthiness. However, it is very important to keep your credit score in the best shape possible. For instance:
- A score of 300-619 is considered low. Lenders will label you a high risk for lending since a low score can mean that you have problems handling your debts.
- 620-680 is considered average, making you only a moderate risk for lending because you’ve had a decent track record of payments and only basic debt problems.
- 720-799 is considered very good, making you a low risk for lending because you’ve had a great record of payments and little to no debt issues.
- Anywhere above 780 is considered excellent, meaning you shouldn’t have much of a problem getting approval for credit and receive the best interest rates on the market.
Don’t Just Check Your Credit Score
With your credit score being such a vital part of the lending process, it can be tempting to look at yours (if it’s good) and think that you’re a shoe-in for approved credit, right? Don’t jump to conclusions. While a good score increases your chances of approval, it doesn’t necessarily mean that you’ll be getting it instantly from every lender you apply with. Remember, credit scores themselves are used more often to determine the interest rate that you’ll be getting. Whether or not you’ll gain a lender’s approval is based on a number of different factors, such as your credit payment history, your employment history, gross income, your variety of credit products, etc. That’s why, as important as the health your credit score is, getting your full credit report and your score is more beneficial in the long run.
For more reasons why getting your credit report is better than just your credit score, click here.
What Is a Credit Inquiry and How Does It Affect My Credit Report/Score?
While we’re on the subject of credit reports and scores, it’s a good idea to talk a bit about “credit inquiries”. Inquiries are performed every time you or another party requests a copy of your credit report for review. When you yourself, a potential landlord, employer, or insurance provider requests your report, it’s known as a “soft inquiry” and will not affect your credit score. A “hard inquiry”, on the other hand, is done by any lender, company, or other organization when they’re considering you as a possible borrower. Hard inquiries do cause your credit score to drop a few points and will remain on your credit report for 3-6 years. That’s why it’s imperative that you don’t apply for too much credit within a short timeframe. Not only will your score drop, but applying for too much credit is also a warning sign to many lenders, making them think that you have a debt problem and are frequently being rejected for credit products.
Should I Pay For a Credit Repair Service?
In our opinion? No. Unfortunately, whenever negative information, such as a notice of a recent consumer proposal or bankruptcy gets put on your credit report, it stays there until Canada’s credit bureaus are legally permitted to remove it. Just the same, only you and your credit habits can change what your credit score looks like. No one can raise your score except for the credit bureaus and they won’t raise it unless you’ve been taking the proper steps to improve it, such as paying your bills on time and in full. For those reasons, it will benefit you to be extremely wary of any individual, organization, or supposed company that offers the idea of repairing your credit for a price.
For legitimate ways to raise your credit score by yourself, check out our other article.
When credit users are desperate to get the loans and products they need but their credit is too damaged to qualify, that’s when scam artists posing as repair companies tend to strike. If you fork over your personal, banking, or credit card information, chances are they’re going to steal your identity and use that information against you. Again, if your credit is damaged, the only thing to do is be patient and prudent with all your credit transactions, until such time as it repairs itself. Never trust anyone that makes you an offer that’s clearly too good to be true.
Check out this infographic to learn how bad credit can affect your daily life.
Why You Should Review Your Credit Report At Least Once Per Year
Like we said, your credit report is an essential part of any and every credit user’s financial stability. In fact, a good record of responsible credit usage can not only help you secure the loans you may need in the future, but can help you secure the best interest rates possible for those loans, whether they’re for a car, mortgage, or otherwise.
Reviewing your credit report is also the best way of finding any errors that might have been listed on your file by accident. Being that both of Canada’s credit bureaus receive millions of new clients and their transactions every day, it can be difficult for them to track any errors made by lenders and other organizations when they report your activity. Just another reason to check your report on the regular. Unfortunately, some credit users, who don’t check their report often, don’t notice errors until it’s too late. These errors can indeed make a huge difference to both your credit score and your credit rating. So, if you do find an error in your report, you can fill out the form that either bureau will provide, wherein you can either update your personal information or request a correction of an error. If the bureaus determine that your dispute is legitimate, they’ll change your report and score accordingly.
To learn how to dispute an error on your credit report, click here.
Afterward, when your credit report is strong and your credit score is high, you’ll find your chances of getting the loans and financial products improving. Once your financial status is in good health, you can get back to the other things that make you happy.
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Margaret Johnson is in the business of helping Canadians tackle their debt, deal with credit issues, and regain control of their finances.