Understanding Your Credit Report
Your credit report contains important information about your financial background that allows banks and other lenders to determine a person’s credit worthiness. Your credit report shows your history of borrowing and repayment of debts. Lenders will usually review your credit report when you make an application to borrow money or get a credit card, and some landlords may use your credit report to decide whether they should rent to you. With a poor credit history, you may have difficulty obtaining a loan, vehicle financing or a mortgage – or you may have to pay a higher interest rate. So it’s important to understand what information is shown in your credit report, how to check your credit report, and how to build and maintain a good credit history.
Your credit report is a history of how you have met your financial obligations. The report is created when you first borrow money or apply for credit. Lenders then send the credit reporting agencies regular updates on your payment history, for example, when you applied for credit, if you make your payments on time, if you miss a payment, or if you have gone over your credit limit.
Your credit report will include:
- your name, address and date of birth,
- your employment information,
- details of your credit accounts and transactions, and whether you have made payments on time,
- your banking information, including any NSF (not sufficient funds) cheque history,
- public record information, such as whether you have secured loans, bankruptcies and/or judgments against you,
- information about any collection actions against you, and
- a record of inquiries from all organizations or individuals that have requested a copy of your credit report in recent years.
Your credit report is compiled by a credit reporting agency. Canada has two credit reporting agencies: Equifax Canada and TransUnion Canada. Governed by provincial laws, these credit reporting agencies use the information provided to them by lenders to put together your credit report.
Lenders use the information in your credit report to help decide whether to lend you money. It’s important to remember that a credit report is only part of the information that a bank uses to determine whether or not to grant credit to a customer. Depending on the type of credit, lenders may also request information to verify income and employment.
There are many companies that provide information to credit reporting agencies, including banks, credit unions, other lending and finance companies and collection agencies. All of these organizations work to provide accurate information and update it regularly, but errors can sometimes occur. Also, depending on how frequently the information is updated, a report could be temporarily out of date. So it’s a good idea to check your report at least once a year and definitely before applying for major loans, such as for a car or mortgage, to make sure that your information is accurate and up-to-date.
The length of time the information is kept on your credit file varies depending on the type of information, but generally most of your credit information remains on file for up to six years.
As a consumer, it's your right to know what information is in your credit report since your application for credit may be denied if there is inaccurate or insufficient information. Checking your credit report is also a good way to determine if you have been the victim of identity theft (the credit report will show credit that you aren’t aware of).
Here’s how to check your credit report:
- Contact Equifax Canada and TransUnion Canada, since the agencies do not share information and lenders may provide information to only one of the agencies. You will need to provide identification to obtain a copy of your report.
- If your request is made in writing, your report will be free of charge and will be mailed to you by the credit reporting agency within two to three weeks. You can also access to your credit report online immediately for a fee.
- If you notice any errors, contact the credit reporting agency immediately. The credit reporting agency will investigate any disputed transactions with the lender and, if the lender confirms that your credit file is inaccurate, the agency will correct the information immediately.
- If you do not agree with the result of an investigation by the credit reporting agency, you can add a brief statement explaining that you disagree to your credit file. The credit reporting agency will show this statement to any lenders that access your credit file.
- If an error has been corrected, the credit reporting agency must by law send a revised copy to lenders who have inquired about you during previous months.
National Consumer Relations
P.O. Box 190, Station Jean-Talon,
Montreal, Quebec H1S 2Z2
Tel. (toll-free): 1-800-465-7166
All provinces except Quebec:
Consumer Relations Centre
P.O. Box 338 LCD 1
Hamilton, Ontario L8L 7W2
Tel. (toll-free): 1-866-525-0262
For Quebec Residents:
TransUnion (Echo Group)
1 Place Laval
Laval, Quebec H7N 1A1
Phone: 1-877-713-3393 / 514-335-0374
Fax: 1-888-280-5538 / 514-334-8698
It’s easy to do. By simply paying the required balances of your bills on time, you are building a good credit history.
Here are a few more tips to build a good credit history:
- Borrow only what you need and what you can afford.
- Try to pay off loans on time and as quickly as possible. This helps your credit history and saves valuable interest costs.
- Make it a habit to check your credit report every year to ensure that the information is accurate and up-to-date. If you notice any errors, inform the credit reporting agency immediately.