Your credit report is an important file that represents you as a borrower as it illustrates how you’ve used credit products in the past. Every Canadian who uses credit has a credit report, these reports are compiled by Canada’s credit bureaus: Equifax and TransUnion. Understanding how your credit report works is essential in maintaining and understanding your credit.
Any potential lender or creditor can ask to see your credit report. They use the information contained in your credit report to evaluate your creditworthiness. People with higher credit scores and fewer negative remarks on their reports tend to be treated more favourably and are more likely to get approved for the credit and loans they want.
While it’s less common, employers and landlords can also request to see your credit report. They are typically looking for a sense of your reliability. They work under the assumption that people with good credit scores and attractive credit reports tend to be more financially reliable.
While the two credit bureaus have their own systems for compiling your information you can expect your credit report to contain the following personal and financial information. Most creditors report new information approximately every 30- 90 days to update the account balances and payments you make.
Your credit report will generally contain details of your credit accounts, such as credit history, dates an account was open or closed and payments to creditors. This includes your credit cards, retail or store cards, lines of credit, personal loans, and in some cases your cell phone or internet accounts.
Your credit report may also contain your late payments, closed accounts with delinquencies, bad cheques, non-sufficient funds, collection accounts, charge-offs, and bankruptcies, and positive closed accounts with no delinquencies or late payments. All these occurrences can stay on your credit report for up to 7 years, though the length can vary by credit bureau and type of negative remark.
Your report will also detail your public records information that may affect your creditworthiness, such as bankruptcies, legal judgments, and registered items. This includes tax liens, which are legal claims by the government that force a person or business to pay their taxes.
If you’ve ever had a conflict and the investigation did not resolve this issue, you have the right to add a short 100-word statement to your credit file, free of charge, explaining your side of the issue. That way, when a lender or creditor pulls your credit report, they will be able to see the note.
Hard inquiries are recorded in your credit report and may decrease your credit scores by a few points. A list of creditors, lenders and other people who have checked your credit will appear on your report. The reason for this is that it’s important to see how often you’ve applied for new credit. If you’ve applied for too many new credit accounts recently, this can be a sign of overspending, making you a risky borrower.
Soft inquiries are also included in your credit report but are not visible to anyone but you.
When your creditors and lenders send your information to the credit reporting agencies, each account comes with two identifiers, a number, and a letter. Here’s what they are and what they mean:
| Installment (I) | You pay back your loan in fixed installments until the loan is paid back in full. Examples of this type of account are car loans or personal loans. |
| Open status (O) | You can borrow money when you need to, up to a certain limit. A line of credit will show up as an open status account on your credit report. |
| Revolving (R) | You can borrow specific amounts of money up until you’ve researched your limit; your payments fluctuate depending on how much you’ve borrowed. A credit card is an example of revolving credit. |
| Mortgage (M) | Mortgages do not always show up on credit reports, it depends on the credit reporting agency. |
| 0 | Account is too new to rate, not yet used. |
| 1 | Paid off within the agreed time limit. |
| 2 | Late payment, 31-59 days late. |
| 3 | Late payment, 60–89 days late. |
| 4 | Late payment, 90–119 days late. |
| 5 | Late payment, more than 120 days late. |
| 6 | Not used. |
| 7 | Account is currently in consolidation, consumer proposal, debt management program. |
| 8 | Repossession |
| 9 | Bad debt, accounts that have been sent to collections or are in bankruptcy. |
Each credit account you have opened will have a code assigned to it with a number and a letter. Anyone who pulls your credit report will be able to tell what type of credit you currently have and what standing they are in.
The Fair Credit Reporting Act states that consumers are protected if there is inaccurate information on their credit reports. So, if you find any incorrect information when examining your own report, you can contact the lender directly. You can also dispute the inaccuracy with either Equifax or TransUnion.
Now that you have a better understanding of how to read your credit report, be sure to check it regularly. Your credit report is used by lenders and other organizations as a means to assess your creditworthiness. The more positive your credit report is, the better your credit scores will likely be, which will help you access different types of credit products.
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Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.
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