What’s in a credit report?
You credit report contains detailed information on any loan or financing that you have taken out over the past 6 years. It outlines how much your credit limit is on each account, how much you owe and whether you make payments on time. It also contains a list of authorized credit grantors who have accessed your file.
Each of your accounts will come with a two digit code which summaries the status and payment history of that account. The first digit is a letter with “R” referring to a revolving debt and “I” referring to an installment account. The second digit is a number that ranges from 0-9. 0 is debt that is too new to rate and 9 is bad debt that has been sent for collection or is related to a bankruptcy. You are aiming for as many “R1” ratings as possible on your revolving accounts.
Who can access my credit report?
Any company looking to lend you money can access your credit report.
What is my credit score and how is it calculated?
A credit score or credit rating is a three digit number between 300 and 900 that summarizes your creditworthiness to potential lenders. The credit score enables lenders to a quick decision on whether to lend you money or not without having to analyze your entire credit report. You may have also heard of credit score referred to as a beacon score or a FICO score.
This three digit number is derived using the information in your credit report using a standardizedTOP SALE formula. The higher your credit score number the better which translates into the likelihood that you will be approved to borrow money at all and on favourable terms.
How can I improve my credit score?
Here are some simple tips to improve your credit score.
- Pay your bills on time – The best way to improve you credit score is to consistently pay your bills on time. Make sure you are able to pay at least the minimum amount on credit cards
- Prevent identity theft – If your identity is stolen it can wreak havoc on your credit history. Make sure to always shred your financial documents and mail. Check your credit report periodically to make sure nothing is a miss.
- Don’t apply for too many credit cards – A general rule of thumb is never apply for more than two credit cards at a time. Applying for many credit cards sends the signal that you are in desperate need of cash. This may give the impression that you are not a good credit risk to potential lenders.
- Don’t go over the limit on your credit card – The higher your balance on your credit card the more impact it will have on your credit score. If your over your credit card limit it is a major signal that you are maxed out and potentially a bad credit risk.
- Build a credit history – Lenders want to see that you are responsible. By building up a history of borrowing money and then paying it back on time consistently it will demonstrate that you are a credit risk worth taking.
Where can I view my credit report for free?
There are two major national credit agencies in Canada which are TransUnion and Equifax. Both will send you your credit report by mail for free. All you need to do is fill out and mail in the appropriate forms with a few pieces of identification. After you have mailed you information to one of the credit agencies, it will usually take two to three weeks to receive your credit report back.
- Your full name
- Present address
- Previous address, if present address is less than 2 years
- Phone number (optional)
- Date of Birth
- Place of employment
- Social Insurance Number (optional)
- Your signature
Also required is two pieces of photocopies identification with both sides. One piece of identification must contain a signature. Examples of acceptable identification include driver’s licence, birth certificate, passport and/or credit cards.
Where can I view my credit report online?
If you don’t have the patience to wait for your free credit report to arrive by mail you can always pay to view it online right away. Both TransUnion and Equifax offer
Equifax Online Credit Report
You can get your online credit report from Equifax here. It will cost you $23.95 and includes the following…
- Your Credit Score
- Your Credit Report
- Explanations of what’s helping and hurting your credit score.
TransUnion Online Credit Report
You can get your online credit report from TransUnion here.
Why is it important to review my credit report from time to time?
With millions of reported entries on Canadian credit files each year mistakes are bound to be made. Each mistake could be something minor or it could be something devastating to your credit profile that limits your ability to obtain credit.
It is estimated that 10% to 33% of credit files out there have some sort of erroneous entry. That is why it is important to check your credit report from time to time so that you can identify potential errors and have them corrected before it impacts your ability to borrow.
How do I fix errors in my credit report?
Fixing an error or inaccuracy on your credit report can be a painful process. You really have two options.
1. Send a letter to the credit agency where you got your report. The letter should clearly outline which item in your credit report that you are disputing.
2. Fill out an online dispute form, print it off and mail it in. You can find the online form for TransUnion here and Equifax here. The pain in the butt is that you still need to mail the form in to the respective credit agency and wait for a response.
I hope you enjoyed this guide and were able to learn something. If I missed anything important please feel free to drop me.