How Credit Reports Work in Canada

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If you are applying for an apartment rental, mortgage, or a new phone plan in Canada, there is an increased chance that your landlord, potential lender, or service provider will want to look at your credit report.

Why? Because credit reports reveal your spending history and help lenders learn whether you’ll return their money or not.

In Canada, there are two credit reporting agencies or bureaus: Equifax and TransUnion.

Both take care of consumer credit reports containing data like your active credit accounts and payment history for evaluating your creditworthiness.

It is essential to remember that your credit card report may differ with both agencies. This is because some lenders could report information to just one, both, or no agency at all.

Let’s dive into the fundamentals of a credit card report.

Credit Reports Explained

A credit report is a statement that includes information about your credit history. Lenders use it to help them assess your creditworthiness. Your credit report includes the following:

  • Personal information (name, address, date of birth, etc.)
  • Credit history (any past loans or lines of credit)
  • Payment history (whether you made payments on time)
  • Bankruptcies or insolvencies

You are entitled to one free credit report from each company every year. This is why it is important to order your reports from both companies.

When You Need a Credit Report

You need a credit report when you are: 

  • Applying for a loan (mortgage, education, car, etc.)
  • Looking for a credit card
  • Thinking about opening a bank account
  • Applying for an apartment (your landlord will request the credit report)
  • Applying for a job requiring you to have a security clearance
  • Anytime you need to find out what is on your credit report.

Credit Scores Explained

A credit score is a numerical expression that estimates your risk to a lender. The score is based on information in an individual’s credit report, including payment history and outstanding debt.

A credit score is important because it can affect your ability to get a loan, credit card, or mortgage. It may also affect the interest rate you pay for these services.

A high credit score indicates low risk, increasing the likelihood of being approved for loans and credit cards with favourable terms.

In contrast, a low score indicates high risk, enhancing the risk of you getting denied loans or being only approved for loans with unfavourable terms, such as a higher interest rate.

According to the Fair Isaac Corporation (FSC), credit scores are calculated using five variables, including:

  • Payment history (35% of the score)
  • Amounts owed (30% of the score)
  • Length of credit history (15% of the score)
  • New credit (10% of the score)
  • Types of credit used (10% of the score)

What’s a Good Credit Score?

The higher the credit score, the lower your risk as a borrower. Wondering how to find out if your score is good enough? Check out this credit score criterion:

  • 300-559 (Very Poor) – If you have this score, it may be very difficult for you to be approved for the loan.
  • 560-659 (Poor) – Although this is a poor score, it makes you eligible for secure services. You can expect an interest as high as 30%.
  • 600-724 (Fair) – You may be offered good credit and an interest rate below 20% at this level.
  • 725-759 (Good) – You will most likely be eligible for credit in this range. You can expect an interest rate of 10%.
  • 750-900 (Excellent) – You are guaranteed the best rates on any product or service at this score. If you can afford the monthly payments, you will be eligible for any loan you intend to apply for.

Related: Learn how to improve your credit score.

How to Get a Credit Report in Canada

If you’re applying for a mortgage or credit card, requesting your report through the mail will be too slow. You’ll want to request your credit report online. It’ll barely take you 15 minutes. Wondering how to do that?

Here are five ways you can get a credit report in Canada:

  • Get a credit report through bureaus like Equifax or TransUnion. You can request a copy of your report by mail, phone, or online.
  • Apply to view your credit report and credit score online using financial technology companies like Borrowell or Credit Karma.
  • Get a free copy of your credit report from the financial institution that provided you with the loan or credit card.

It’s important to review your credit report regularly to ensure no errors or inaccurate information. If you find any incorrect information, you can dispute it with the credit reporting agency.

image showing a credit card report inspection

How to Read a Credit Report

Your credit report is the record of the credit history of an individual. It includes information about whether or not you have made your payments on time and reports on your current debt situation.

Two primary types of information are contained in a Canadian credit report: personal information and credit history. Personal information includes your name, address, birth date, and Social Insurance Number (SIN).

Your credit history is a record of your borrowing and repayment activity. It can include your credit card balances, loan amounts, and payment history.

Your credit report contains factual information about your loans and credit cards, such as:

  • The time you opened your account
  • How much debt do you owe
  • If the payments were made on time
  • If you missed any payments
  • If your debt has been transferred to a collection agency
  • If you cross your credit limit
  • Personal information, such as public records, e.g., a bankruptcy.

It also features several letters. Here’s a handy table for you to understand what those I’s and r’s on your credit report mean:

LetterMeaningExample
IInstallment Credit: This is when you borrow money for a period of time. You are bound to make fixed payments until you pay it off.Car Loan
OOpen Status Credit: It is when you borrow money for a particular limit.Mobile phone account
RRecurring Credit: You can borrow money up to your credit limit on a recurring basis. You can make regular payments in different amounts depending on the balance of your account.Credit Card
MMortgage Loan: It relates to the mortgage information included in your report.Mortgage

When you go through your credit card report, you’ll come across numbers. Wondering what these mean? Here’s a table to make your life easier:

NumberMeaning
0Approved but not used.
1The payment was made within a month of billing.
2The payment was late by 31 to 59 days.
3The payment was late by 60 to 89 days.
4The payment was late by 90 to 119 days.
5The payment was late by more than 120 days.
6The code was not used.
7Payments were made regularly using the following debt management options.
8The bank has begun the process of repossession.
9Bankruptcy.

The Credit Bureaus in Canada

Equifax and TransUnion are the major credit bureaus in Canada. They maintain records of your credit history and generate your credit report.

Equifax is a credit bureau that has many key benefits. Some of the most important benefits of the bureau are:

  • Provides alerts of critical changes to your Equifax credit report
  • Access your Equifax credit score daily
  • The platform has dedicated ID restoration specialists
  • They have up to $1 MM in ID theft insurance

Similar to Equifax, TransUnion has many key benefits when acquiring your credit report. Here are the top features of TransUnion:

  • You have access to your credit score and report
  • You will receive alerts whenever changes happen in your report
  • The platform provides personalized credit and debt analysis

TransUnion provides up to $50,000 in ID Theft Insurance.

How Long Information Remains on a Credit Report

Generally speaking, negative information stays on your credit report for six years, while positive information stays indefinitely. If you make late payments or get negative marks on your credit report, they won’t be held against you forever.

However, if you have a long history of on-time payments and other positive financial actions, those will remain on your credit report indefinitely. This is one reason why it’s important to try to keep your accounts in good standing at all times.

Access To Your Credit Report

Lenders, financial institutions, or companies with legal purposes can assess your credit report.

For instance, when you apply for a credit card or loan, a lender could use the information in your credit report to evaluate whether to give you money or not.

It is important to note that no one can access your credit report unless they have a permissible purpose.

What is a permissible purpose? It includes the reasons established by the Canadian government for someone to be permitted to see your credit report.

Here are examples of permissible reasons:

  • Creditors can view your credit report when you apply for a lease or buy a vehicle.
  • Lenders can review an existing credit report to evaluate whether you meet the required account terms.
  • Debt collection organizations can view your credit report to collect payments.
  • Insurance companies can view your credit report to determine whether or not you qualify to meet their terms.
  • Prospective employers or employers who give you a job or promotion offer can view your credit report.
  • Landlords, utility companies, or any companies that provide a service can look at your credit report.

Hard Credit Check vs. Soft Credit Check

There are two types of credit checks: hard and soft. A hard credit check happens when a lender requests a copy of your credit report from a credit bureau.

This type of check can impact your credit score and is usually done when you’re applying for a loan or mortgage. Examples of hard credit checks include credit card applications, utility applications, and apartment rental applications.

A soft credit check happens when a lender checks your report to see if you’re pre-approved for a product or service. It doesn’t impact your score and is often done when applying for a new credit card. Examples of soft checks include personal credit checks, insurance, and employment applications.

The Takeaway

Your credit report is an extensive list of your payment and credit history. This data is then used to calculate your credit score.

Two major credit card bureaus can help you get a credit card report. It is important to check for any mistakes in your credit score. In any case, if you find mistakes in your report, you can just contact your credit bureau directly.

You must review your credit report since it helps track your finances and safeguard you from fraud and expensive lawsuits.

The information on the credit report help to see how you manage your credit, and good credit makes you eligible for loans with the lowest interest rates.

FAQs

What is a good credit score in Canada?

In Canada, a good credit score, according to Equifax, is between 660 and 724. With this score, you are eligible for loans at the lowest rates

How long is a credit report valid in Canada?

Negative information on your credit report in Canada is valid for up to seven years. Moreover, the bankruptcy information may remain for up to 14 years if you declare bankruptcy more than once.

Who looks at your credit report and why?

Credit reports are read to determine your creditworthiness. Agencies that look at your credit report include credit card issuers, mortgage lenders, and auto lenders.

Do you have to pay for a credit report?

In Canada, you do not have to pay for your credit card report as you are entitled to acquire a free credit report annually from Equifax or TransUnion.

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SnappyRates Team

The SnappyRates Team comprises personal finance writers who have reviewed and personally tested hundreds of financial products in the Canadian space. With over 20 years of combined experience to draw from and expertise in all things credit cards, banking, insurance, and mortgages, our goal is to provide you with the most comprehensive guides and resources to help you on your financial journey.

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