7 Facts About Your Credit Rating in Canada

How much do you know about your credit rating?

It pays to know because it can make all the difference to you when you’re applying for new sources of credit or when you’re applying for a mortgage.

If you have a good credit rating, the lender will look upon you favorably.

If you have a negative credit rating, on the other hand, you might be assessed as a risk by the lenders in question, and face higher interest or a rejected application.

Here are 7 facts about your credit rating in Canada.

#1: You can obtain your credit report and your credit score for free

In Canada, you don’t have to pay for a copy of your credit report.

You can get it for free from either TransUnion or Equifax (or both).

You are only entitled to one free copy from each bureau a year, but if you want to review your report more frequently, you could alternate between both credit bureaus every six months to ensure you never have to pay.

And whereas in the past you had to pay for your credit score (which is different from your credit report), you can now see it for free.

#2: Your credit score is based on certain factors

A number of factors can determine how bad or how good your credit score is.

These include:

• Your ability to meet your financial obligations. If you have paid your bills on time, your credit score will improve.

• The number of credit accounts you have. If you have too many, this could negatively affect your credit score. Especially if you open up too many accounts around the same period, you might be perceived as a high-risk borrower because of your need to take on a lot of new debt.

• The amount of time you have had credit. If you have had credit for a long period of time, and have a strong history of making payments on time, this will reflect well on your credit score.

These are just a few examples, but you can learn more about the factors related to your credit score here.

#3: Your credit report could contain errors

In some circumstances, the errors in your report could work against your credit rating.

If a previous lender has failed to disclose the fact that you have cleared your debt, for example, it might still show up as arrears on your credit report.

This will lower your score.

And if some of your personal information is incorrect, perhaps in regards to your employment and income situation, you might also see this reflected on your credit score.

This is why it’s vital that you check your report for errors, and if you spot any, you should use the resources here for Equifax and here for TransUnion to dispute them.

#4: Checking your score won’t hurt it

Checking your credit score is known as a ‘soft inquiry.’

This means your credit score won’t be affected when you apply to view it.

You can view it as many times as you want (and your lenders and employers can too) without any detriment to your rating.

However, you will face penalties if you make too many ‘hard inquiries.’

These have nothing to do with you checking your credit report.

Rather, if you apply for a lot of loans and/or credit cards within short periods, you will negatively affect your credit score.

#5: Your credit score can help you spot signs of fraud

If you regularly keep an eye on your credit score, you will be able to spot any discrepancies that could suggest identity theft.

If you notice that your credit score has dropped dramatically, and you’re sure you aren’t to blame, for example, then it might suggest somebody has taken out a loan or tried to apply for a loan in your name.

You will be able to spot this on your credit report, as if you notice unfamiliar accounts, you have a reason to suspect foul play.

Should you be suspicious, it is wise to contact the credit bureau in question, as well as the police, to alert them to the problem.

#6: The negative information that has derailed your credit score isn’t permanent

We all make mistakes, and if your credit score has suffered because of such things as debt, missed payments, and bankruptcy in the past, you can have the peace of mind that the information pertaining to each won’t remain on your credit report forever.

As long as you take steps to improve your credit rating, such as by keeping up with loan payments and avoiding situations that could drive you into debt, you will be able to maintain a positive credit score.

#7: A poor credit score could cost you thousands

If you have a poor credit score, you will get less-then great terms when you’re applying for loans and credit cards.

In those cases where you aren’t turned down, you might have to face higher rates of interest.

As a rule, the lower your credit score, the higher your interest rate will be, so you could end up paying well over the odds in comparison to your family and friends.

And if you do get turned down for a loan, credit card, or an item on store credit, you might be tempted to turn to less-than-reputable loan companies to obtain the money you need, and in such cases, the amount of interest will be a lot higher than you would usually pay when using a reputable service.

In both cases, you risk financial hardship, because if you can’t make your payments each month, you might face fees and interest charges on your credit accounts.

For more information on your credit rating, contact Equifax and TransUnion, and obtain your credit report and credit score from them.

And if your credit rating is lower than you would like, perhaps because you have fallen into debt, give us a call, and we will work with you to help you find a way to improve your financial position.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?