Credit scores are an important financial tool for many lenders when approving consumers for credit. When you apply for a loan, the lender may pull your credit report from one of Canada’s two major credit bureaus: TransUnion and Equifax. Lenders use the information on these reports to assess your creditworthiness. The question is, what is a credit bureau, and what purpose do they serve?
Key Points
- A credit bureau is an entity that collects and maintains credit information.
- Credit bureaus collect information from various sources, like banks, creditors, lenders, and public records, then compile it into a credit report.
- The two main credit bureaus in Canada are Equifax and TransUnion.
What Are Credit Bureaus?
Sometimes referred to as a credit reporting agency, a credit bureau is a company that compiles information about how individuals handle their credit products and debts. Credit companies, lenders, and banks provide credit reporting agencies with this information, and then the credit bureaus create a credit report for each individual.
Credit bureaus will then provide this credit report to various parties, including creditors, lenders, employers, landlords, and the person it belongs to. Credit reports serve as a risk management tool to help determine an individual’s creditworthiness.
Are Credit Bureaus Regulated?
While credit bureaus are not government-run, they are regulated by federal and provincial law. The Personal Information Protection and Electronic Documents Act (“PIPEDA”) is the federal legislation credit bureaus must follow to protect consumer information. Most provinces also have extra legislation to further protect consumers and their credit information.
What Do Credit Bureaus Do?
Credit bureaus provide the following services:
Create Credit Reports
As already mentioned, credit bureaus are responsible for collecting credit data that lenders and creditors would be interested in when consumers apply for a loan. All the information they gather is collected into a neat little package in the form of a credit report.
Generate Credit Scores
Your credit score is a 3-digit number that is created based on the information contained in your credit report. Credit bureaus create this number to help lenders and creditors decide whether they can provide you with new credit. This number is based on five common factors:
- History of payments
- Total debts
- Credit length
- New inquiries
- Public records
Credit Monitoring
Both credit bureaus offer consumers access to their credit monitoring services. This service allows consumers to access their credit report and credit scores, typically through an online account. Consumers can keep an eye out for identity theft, correct errors, and receive alerts when information is changed on their credit report.
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
How Do Credit Bureaus Work?
When you open up a credit account, your lender or creditor will report your credit activity to either one or both credit bureaus. In some cases, such as payday loans, lenders won’t report to either. The credit bureaus will then use that information to create and update your credit report.
Once a credit file is opened in your name, other potential creditors and lenders can now request to see your credit report to help them assess whether you’re a creditworthy consumer.
What Type of Data Is Reported To The Credit Bureaus?
The type of information that is reported to the credit bureaus includes:
- Personal Information, such as your name, date of birth, and address
- Credit inquiries
- Credit account information, such as the date your account opened/closed and payment history
- Public record information, such as judgments or bankruptcy
- Information about accounts in collections
Who Reports Data To The Credit Bureaus?
TransUnion and Equifax both get their information from creditors and lenders that consumers deal with. So, any creditors that you have dealt with in the past will be the ones reporting their information to the credit bureaus. More specifically, your payment history and account status are provided to credit bureaus, as these are the two more important factors that influence your credit report and scores.
That said, not all lenders and creditors report information to the credit bureaus, which means both entities might have different information. In addition, each credit bureau might have its own credit scoring model that they follow that calculates your credit scores. As such, your credit scores could vary between the credit bureaus.
Who Can Access Your Credit Information?
Several entities that are also interested in the information that the credit bureaus may have, including:
- Financial institutions, including banks, credit unions, lenders, and credit card providers
- Landlords
- Employers
- Cell phone companies
- Utility companies
- Insurance providers
Essentially, any company that has a valid reason to get a copy of your credit report may do so. However, they must get your permission.
Why Should You Get A Copy Of Your Credit Report?
It’s important to review your credit report regularly in order to see where you stand as far as your credit is concerned. You can use your credit report to:
- To See What’s Affecting Your Credit Scores – If you have bad credit, your credit report can give you an idea about what’s causing it. This can help you take steps to make improvements to your credit score and financial situation.
- Look For Mistakes – Pulling your report gives you a chance to verify that all information contained in it is correct. If there are any mistakes, your credit scores could suffer. Even the smallest errors can cause your credit scores to dip, so it’s important to identify them. If you do spot any, they should be immediately reported to the credit bureau and be investigated and rectified.
- Check For Signs Of Identity Theft – Checking your credit report regularly can also help you catch any signs of identity theft. If you notice any unknown hard inquiries or open accounts, it can be a sign of identity theft. Catching these signs early on can help you take measures to prevent any damage to your credit and finances.
Bottom Line
Your credit report is important, and the credit bureaus in Canada are the places to go to obtain this critical credit profile. If you’re looking to apply for a loan in the near future, the information contained in this report will play a key role in whether you can get approved.
