Credit scores are an important financial tool for many lenders when approving consumers for credit. In Canada, there are two credit bureaus; TransUnion and Equifax, that compile consumer credit information and provide it to banks and other lenders so that they may assess their client’s creditworthiness.
What Are Credit Bureaus?
A credit bureau (sometimes referred to as a credit reporting agency) 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 the individual it belongs to, or to a lender or some other third party requesting access. Credit reports serve as a risk management tool to help determine an individual’s creditworthiness.
Are Credit Bureau Regulated?
Yes, 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 legislations to further protect consumers and their credit information.
What Do Credit Bureaus Do?
As already mentioned, credit bureaus are responsible for collecting credit info on consumers that lenders and creditors would be interested in when consumers apply for a loan or credit. All the information they gather is collected into a neat little package in the form of a credit report.
What Services Do Credit Bureaus Offer?
As we discussed above, credit bureaus provide consumers, lenders, and creditors with credit reports, a file that contains information concerning an individual’s credit habits and history. Aside from this, they also offer other credit information tools and services.
- Credit Scores. This 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 or not they can provide you with new credit. This number is based on 5 common factors: history of payments, total debts, credit length, new inquiries and public records.
- Credit Monitoring. Both credit bureaus offer consumers access to their credit monitoring services. This service allows a consumer access to 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.
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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. Your credit activity 30 days to the credit bureaus who 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 person.
What Type of Data Is Reported To The Credit Bureaus?
The type of information that is reported to the credit bureaus includes:
- Personal Information (name, date of birth, address, etc)
- Inquiry information (when you apply for a loan or credit)
- Credit account information (date your account opened/closed, payment history, etc)
- Public record information (such as judgments or bankruptcy)
- Collections information
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?
Lenders and banks usually request access to the information collected by credit bureaus to make lending decisions. But there are other entities that are also interested in the information that the credit bureaus may have, including:
- 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 or fair 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 – Another reason to pull your report is to verify that all information contained in it is correct. If there are any errors, your credit scores could suffer. Even the smallest errors can cause your credit scores to dip, so it’s important to identify any errors. If you do spot any, they should be immediately reported to the credit bureau and be investigated and rectified.
- Check For Any 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.
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Credit Bureau FAQs
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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 or not you can get approved. If you’re looking to improve your credit score or want to apply for a loan, let Loans Canada help. Get in touch with us today.