A credit report is a “snapshot” of your credit history. It is one of the main tools lenders use to decide whether or not to give you credit.
Your credit file is created when you first borrow money or apply for credit. On a regular basis, companies that lend money or issue credit cards to you, including banks, finance companies, credit unions, retailers, send specific factual information related to the financial transactions they have with you to credit reporting agencies.
Your Credit Score
Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers.
There are many different ways to work out credit scores. The credit-reporting agencies in Canada are Equifax and TransUnion. They both use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay. The lower your score typically the higher the interest rate charged on a mortgage for example.
Your Credit Rating
Credit-reporting agencies report the lenders’ rating of each of your credit history items on a scale of 1 to 9. A rating of “1” means you pay your bills within 30 days of the due date. A rating of “9” means that you never pay your bills at all or that you have made a consumer debt repayment proposal to the lender. A letter will also appear in front of the number: for example, I2, O2, R2. The letter stands for the type of the credit you are using.
The most common ratings are “R” ratings. These are known as North American Standard Account Ratings and are the most frequently used. The “R” indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9. The R ratings are a coding system that translates “on time”, “one month late”, “two months late”, etc., into two-digit codes.
Other rating indicators that might be found on a report are “I” for installment credit or “O” for open credit line.
(Source: Equifax Canada)
How to Obtain Your Credit Report
Many consumers are not aware that you can receive a free credit file disclosure from Equifax Canada Inc. via Canada Post.
Simply complete the Credit Report Request PDF and either mail or fax your application to Equifax.
For more information or if you had any questions about understanding your credit please contact Scott Dawson by any of the methods below: