How to Read Your Credit Report
Tips on Reading Your Credit Report
Whether you’ve recently paid off substantial debt, are continuing to pay on a mortgage, or simply want to know what state your credit is in, you need to understand the things to look for when reading your free credit report.
In Canada, Equifax and TransUnion are required by the government to provide you with an accurate up-to-date credit report each year.
When you receive this in the mail or via fax, what should you be looking for?
Reading your credit report is not difficult, and below you will find the things that you may want to consider when viewing your reports.
(And yes, you should request one from each agency!)
Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation
What is a credit report?
So, you’ve taken the first step.
You’ve requested your credit report from each credit reporting agency because you were advised you needed to do so.
But, what exactly is your credit report?
Think of your credit report like a report card that you might have received in school.
A credit report is your credit history consolidated into two easy-to-read reports.
(One is from Equifax, the other from TransUnions.)
Whenever a potential lender wants to ensure you are a trustworthy lender, they request your credit report.
However, it’s not only lenders who look at your credit report.
Other potential viewers include insurance agencies, your cell phone company, landlords, and potential employers.
It’s important to know exactly what your report says, as well as understand how you can improve your report.
A credit report is a collection of information held at one or more Canadian credit bureau service providers.
Banks and other businesses that lend money access this information with your consent.
This information is compiled into a single report that helps lenders determine if you are a good financial candidate.
Next, we’ll go over how to read your credit report and address some common misinformation and questions you may have.
What fees should I expect when requesting my credit report?
If you’d like to receive your credit reports by email, you can request that for a fee of several dollars.
This does help expedite the process if you are looking to take advantage of your credit report immediately, rather than waiting for physical mail.
You’ll also need to pay to see your credit score, while your credit report is free.
Will both credit reporting agencies report the same information?
You should be requesting your credit report from both Equifax and TransUnion, since each entity may receive slightly different information about you.
Because of this, your report will vary depending on which agency you look at.
This means that you should not be assuming that each agency is receiving the same information on one consolidated credit report.
The discrepancy between the two agencies is largely due to creditors not reporting your information to each of these agencies.
While one creditor may report information to TransUnion, another may opt to report their information directly to Equifax.
Additionally, many creditors may only update monthly, or even less often, so each agency may have differing information.
When you received your report card from school, did it ever read “has potential, but needs to apply themself” next to a subject?
You’re not alone, and if you are reading something similar on your credit report, remind yourself you have opportunities to improve your credit report and credit score.
In fact, a credit report will guide you to the exact places to focus on.
To improve your credit score, your credit reports will offer direct advice that you should consider taking action on.
It will state three facts to help you improve your ranking, so it’s important to take time to know how you could be improving your overall credit.
While your credit may not be perfect, this section is an ideal place to know where to begin to improve your credit score.
There are hundreds of reasons your credit may not be perfect, so don’t become disheartened if you would like to see a better report, but instead begin working to improve it.
If you’re not certain where to begin, you may want to contact a credit counselor to start improving your credit report and score.
If you’ve scanned your credit report, what you’ve probably taken the most note of is the credit score.
There are a variety of combined factors that make up your credit score.
Your credit score will fall somewhere between 300 and 850, with a higher score being better.
The range is divided on the scale from poor to excellent.
It is fairly difficult to obtain a score of excellent, but you should always aim for a good or very good score to obtain the best interest rates from lenders.
The first and arguably the most important aspect that affects your credit score is your payment history.
If you keep your payments current on utility bills, loans, and credit cards, your credit score will be higher.
If you are consistently late or miss payments entirely, this will greatly reduce your credit score.
Next, your credit score is affected by how long you’ve held credit accounts.
Your history of accounts is valuable to a potential lender because it shows how long you’ve had established credit.
Similarly to history is utilization ratio.
This is the percentage of credit you actively use based on how much credit you have access to.
While you want to use some credit to improve your credit score, it is advisable to keep it lower than 50% at any given time.
Finally, your credit score is directly affected by the number of inquiries made by outside sources.
Hard inquiries are those that are made by potential lenders; if you have more than two on your file, this can reduce your credit score.
Keep in mind that inquiries to your credit report fall off after two years.
When you view your credit score, there are other factors that may affect it.
Even if the two credit agencies have the exact same information on you, your credit score may vary between the two because of the financial calculators that they use.
If your credit score is slightly different between the two agencies, don’t be alarmed.
They will typically be relatively similar to one another, though.
Your credit accounts
Make sure your information is correct
Before you delve into your accounts listed, make absolutely sure that all your personal information is correct, including your name, address, birth date, social insurance number, and employment information.
Examine your accounts thoroughly
Your credit report will list each of your accounts and your payment history.
Each account will be listed with the type of credit it is, such as installment or revolving accounts.
Installment accounts are loans with a pre-set number of fixed-amount payments to be made, such as a car loan or mortgage.
Revolving credit is typically that of a credit card, store card, cell phone bills, and similar.
Each of these accounts will also state whether it is a joint account, a co-signed account, or if you are solely responsible for the debt.
If you recognize the account, move forward to the section for the payment status.
This section should say “paid as agreed,” unless you have missed payments, or made late payments.
If you find that an account does not state that, either remedy this by keeping your account current, or contact your creditors if you feel that it is was reported inaccurately to the credit agency.
Your credit accounts may also list a bank account if you have overdrawn it, or if it has become delinquent and gone to a collection agency.
Since your credit report will never state your bank account statements, you will need to contact your bank directly for this information.
Each of these accounts will remain on your credit report for many years, typically for up to six years even after a line of credit has been closed.
What happens if I find an error on my credit report?
If you find an error on your credit report, it is up to you to dispute that information that you believe is wrong by gathering all and any evidence that supports your dispute.
At that point, contact the credit agency on which you found the inaccurate information by filling out their individual forms.
In addition, you may want to contact the creditor as well, since this may help to expedite clearing up the misinformation.
For complete and thorough information on the steps you need to take, make use of the Financial Consumer Agency of Canada website that clearly guides you through what needs to occur to clear any errors on your credit report.
Each time you request a loan, or line of credit, your potential lender pulls your credit report, which is called a credit inquiry.
Under this section of your credit report, you should be able to quickly identify each credit inquiry listed.
Each inquiry will state the date inquired, the organization, and contact information.
If you do not recognize each of the inquiries, this may be a red flag for fraud, and you need to take action to remedy this immediately.
Consumer Statement and Public Notices
Last, but not least, is the final section which states any consumer statement and public notices.
This includes any consumer proposals, bankruptcies, or legal judgments against any of your accounts in the past six years.
It should be noted that bankruptcy will continue to affect your credit score for seven years.
If you would like to make a statement on your credit report, you can do this here.
This may be something as simple as explaining you are in the process of correcting an error on a creditor’s note.
If you would like help wording a consumer statement on your credit report, or if you need help understanding how to improve your credit report, reach out to Bankruptcy Canada today.
Our debt experts can help counsel you and ensure you are improving or maintaining your credit score.