A credit report is a history of how consistently you pay your financial obligations. A credit report is created when you first borrow money or apply for credit. On a regular basis, the companies that lend money or issue credit cards to you (banks, finance companies, credit unions, retailers, etc.) send the credit reporting agencies specific and factual information about their financial relationship with you - when you opened up your account, if you make your payments on time, if you miss a payment, or if you have gone over your credit limit, etc.
Equifax Canada receives this information directly from the financial and retail institutions and retains it to help other lenders make decisions about granting you credit. Because your credit report contains all the information received from your lenders and provides a picture of your financial health, other lenders will request your report when they are determining whether or not to grant you a loan. Your credit report is a history that will help them determine what kind of lending risk you are - if you are likely to repay your obligation on time or not.
What is in my credit report?
Below is a list of the major sections found in your credit report:
Personal Identification - Includes key identification information, such as your name, address, date of birth and Social Insurance Number (SIN)
Consumer Statement - Allows you, the consumer, to add a brief comment about any information in your report
Credit Information - Provides details of your credit accounts and transactions and shows if payments are being made on time
Banking Information - Includes information on your bank account and NSF cheque history
Public Record Information - Contains information about secured loans, bankruptcies and/or judgments
Third-Party Collections - Contains information about any involvement with a collection agency trying to collect on a debt
Inquiries - Includes all organizations or individuals that have requested a copy of your credit report in the past three years
*Note: Mortgage information - Details about your existing mortgage(s) may appear in your credit report. Mortgage information is not used to calculate your credit score since it is not reported by all lenders. How is information in my credit report used?
Credit information is gathered by credit reporting agencies, sometimes called credit bureaus. There are two major credit reporting agencies in Canada: Equifax Canada Inc., and TransUnion of Canada. Governed by provincial and federal laws, credit reporting agencies store and maintain credit information about individual Canadian consumers for use by members of the credit reporting agency. Members include banks, finance companies, auto leasing companies, credit card companies and retailers.
Credit grantors update individual credit reports regularly by providing information to credit reporting agencies about their customers' credit and payment activities. This ensures that credit reports remain up-to-date and as complete as possible. Other sources of the information contained in your credit report can include public records from courthouses across the country and collection agencies.
Who can access my credit report?
Federal and provincial laws are very specific regarding who can review your credit report and for what purpose. A company or individual may only obtain a copy of your credit report with your consent or after informing you that they will be reviewing your report. Additionally, an individual or company must have a legitimate business reason and a permissible purpose, as stated in government regulations, to obtain your credit report.
When you apply for a loan or credit card you are usually asked to complete and sign an application form. An application normally includes written consent giving permission to the credit grantor to check your credit report when you first apply and throughout the life of the account. In addition to your name, an application often asks for your date of birth, your current address and a previous address if you've recently moved - information that helps to locate your credit report at a credit reporting agency.
Each time a member of the credit reporting agency requests your report, the request is noted on your report as an inquiry and kept for 3 years. You can therefore see a record of who has requested your credit report and when.
A credit reporting agency may only provide a copy of your report when the request relates to the extension of credit, collection of a debt, housing rental or an application for employment or insurance purposes. Since your credit report contains only factual information, it is important to remember that each of the companies requesting your credit report will interpret those facts in its own way to arrive at a decision.
Common sense credit practices copied from my weblog (Stuff your parents and teachers might not have known)
Here are a few tips to keep your credit score high.
Be selective and don’t let anybody pull your credit bureau unless it is absolutely necessary. Indiscriminate credit seeking is viewed as a ‘risk-behaviour’ by the credit bureau’s Beacon scoring software If you are car shopping make sure you tell the dealership credit manager that you do not want them to shop your deal to a bunch of different financers who will each pull a bureau.You may not even buy their car, but the end result is 6 car finance inquiries in one month.
Don’t miss any month in your payment cycle, even if you paid a large amount on your credit card in the prior month.If you miss a month it will change your good R1 rating to an R2 or and R3. (Even if your balance is only $1 or $2 dollars...Ouch!)
Make sure your credit card balances are kept at less than 50% of the limit. If you owe $950 and your limit is $1000, you are seen are using 95% of your credit capacity.You can either pay your credit balance down to $499 or ask the lender to increase your limit to $2000 (it has the same benefit).
The bank does not report mortgages on your bureau, but they will report a Home equity credit line.So if you have a limit of say $300,000 and you are using it to close to the limit, you can either ask the bank to treat it like a mortgage and not report it on the bureau or if you are at your limit anyway, flip the HELOC into a lower rate variable mortgage (one that definitely won’t report on the bureau) a reported home equity line of credit, with a high use percentage, can negatively affect even the best credit customers.
Regularly review your credit bureau for evidence of errors and identity theft.
If you feel you have an inaccurate rating you can have the credit bureau assist you with the repair or it is more serious you can contact your lawyer to send out a well placed letter to the credit firm who provided the inaccurate report.
