You probably check your credit report and credit score regularly. But you may be wondering where your credit reporting information comes from in the first place. The answer: credit bureaus.
To help you get a deeper understanding, we have answered some common questions about what the main credit bureaus are in Canada, how they work, who reports to them, and other key facts to know.
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What is a credit bureau?
A credit bureau is an agency (also called a credit reporting agency) that collects credit information about you from your creditors and lenders and puts together this data in the form of a credit report.
In Canada, there are two official credit bureaus called Equifax and TransUnion. Both Equifax and TransUnion were originally founded in the United States. Equifax opened in Canada in the early 1900s and TransUnion Canada was formed in 1989.
Equifax and TransUnion are private companies in Canada, and they only receive information from your Canadian creditors, which means you will only see Canadian debt and financial information listed on your credit report.
Who reports to credit bureaus in Canada?
Most creditors and lenders report to the credit bureaus, including but not limited to:
- Financial institutions like banks and credit unions
- Credit card companies, retail, and store cards
- Collection agencies
- Some cell phone companies, cable, and internet providers
- Public records like bankruptcy or consumer proposal
- Court-ordered judgments and registered items like a lien on a car
You may be wondering if your landlord reports rent payments to the credit bureaus. The answer is they may, but it is up to the individual landlord to decide if they want to pay a fee to do so. There is also a Landlord Credit Bureau (LCB) that currently operates in British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario. Landlords may voluntarily report to the Landlord Credit Bureau. The LCB then passes this rent payment information to Equifax Canada where it will appear on your credit report. It’s important to know that if you fall behind on your rent payments and they wind up in collections, that collection activity will appear on your credit report.
Student loans, both private and government, are also usually reported to the credit bureaus and can affect your credit rating.
There are also certain accounts that are generally not reported to the credit bureaus and so will not appear on your credit report including your gas, hydro account, or gym membership, for example. Payday loan lenders also don’t report to the credit bureaus unless you default on your payments and your loan goes into collections. Loans in collections are reported to the bureaus and will appear on your credit report.
The Canada Revenue Agency generally does not report to the credit bureaus either. The CRA keeps your information confidential. If you file your tax return, any tax debt will not be reported to the credit bureaus. The exception is if you owe a significant amount of tax debt and make no effort to pay it back at all, then the CRA will involve their collections department. They can then get a court judgment against you for the debt, and that judgment will appear on your credit report in the legal section. So, while simply owing tax debt won’t affect your credit health, not paying your tax debt and being sued for it, will. Learn more about how owing taxes affects your credit in Canada.
What information is on a credit report?
Your credit report information is divided into four main parts:
- Personal information: Your name, address, social insurance number, and date of birth.
- Creditor trade lines: These are the accounts you have with lenders, and it includes the name of the lender, the type of account (credit card, mortgage, line of credit, installment loan, etc.), the date the account was opened, your current balance, credit limit, and your payment history (late payments or payments made on time).
- Credit inquiries: This is information about who has been looking at your credit report. There are two types of inquiries – soft and hard. A soft inquiry involves creditors performing a simple credit check on you or you pulling your own report and it has no impact on your credit. A hard inquiry does impact your credit and happens when you make a credit application for things like a loan or credit card, for example. You want to avoid having too many hard inquiries, as it will lower your score and ability to borrow.
- Public records and collections: This is where you would see legal activity like a bankruptcy or consumer proposal, court judgments, liens (against your car, if you have a car loan), and accounts in collection.
Your credit report also provides your credit history, which shows the type of credit you have and how often you make your payments.
Items that are not listed on your credit report include your income and bank (chequing and saving) account balances. Your credit report also won’t show any assets or investments you may have. It is, therefore, not always a good indicator of how financially successful a person is because a lot of financial information is omitted.
Getting and reviewing a copy of your report at least once a year is a good practice. If you see any errors on your credit report, you can contact the credit bureau directly to dispute them. Filing a dispute is free, but it is your responsibility to prove that any issues with your report are wrong.
Both Equifax and TransUnion allow you to get a free copy of your credit report, so we would encourage you to take advantage and check regularly for any errors or fraudulent activity from identity theft.
Who do credit bureaus work for and are they regulated?
You may be surprised to learn that credit bureaus do not work for consumers. Instead, they serve their members, which include banks, finance companies, auto loan or lease providers, credit card companies, and collection agencies.
But despite working for lenders, credit bureaus do not make lending decisions. They are independent entities that simply communicate information between the consumer and the lender via credit reports.
Credit bureaus are regulated at the provincial level and have basic requirements they must follow, two of which are most relevant for you – the consumer:
- Limiting access to your credit information only to those with a legitimate reason. These reasons can include giving you credit, tenancy, insurance, employment, and can also include debt collection, for example. It is an offence for anyone to get your credit information from an agency for a reason that doesn’t involve a credit transaction with you.
- Adverse action. This means, for example, that you must be notified if a financial institution denies you a claim based on your credit information or if a charge is increased because of your credit history.
At a federal level, credit bureaus have to abide by the Personal Information Protection and Electronic Documents Act (PIPEDA), which is a Canadian law relating to data privacy. It governs how private companies collect, use, and disclose your personal information.
What are not credit bureaus in Canada?
As mentioned, Canada has only two official credit bureaus – Equifax and TransUnion.
But perhaps you have also heard of other credit report providers like Borrowell, Credit Karma, and ClearScore. You should be aware that companies like Borrowell, Credit Karma, ClearScore and any other alternative credit reporting company pulls data from the two main credit bureaus too. They do not provide you with any new information that you can’t obtain directly from the two official sources yourself.
The only thing these companies can give you is access to a free credit score. But recently, Equifax Canada has started providing consumers with a free credit score as part of their reporting when you go through MyEquifax. TransUnion, however, still charges a fee for credit score information. The problem is, getting this free credit score from an alternative credit report provider comes with a catch. The main goal of these alternative credit reporting companies is to sell you credit products like personal loans and credit cards.
The way it works is, before you can access your free credit score from either Borrowell, Credit Karma, or ClearScore, you must provide them with a lot of personal information – details that are not on your credit report – like your annual income and personal financial goals. They then use this information to tailor debt services to you. The risk is that you may be end up borrowing when you otherwise wouldn’t have. If you do decide to use an alternative credit monitoring service to get a free credit score, think twice before accepting any promotional offers you get and ask yourself if you really need more debt.
Another issue is that companies like Borrowell, Credit Karma, and ClearScore may not provide you with a credit report that is up-to-date, or it may have several errors. To fix these errors, you will need to contact the main credit bureau they used directly. Credit Karma and ClearScore retrieve your information from TransUnion. Borrowell gets it from Equifax. Of course, you can just skip the middleman and rely solely on the two official bureaus for all your credit reporting needs.
Canada’s credit bureaus are keepers of your credit history. Each credit bureau manages its own database, so your credit report may be slightly different depending on the bureau you pull from. Also keep in mind that while most banks and lenders report to both credit bureaus, some only report to one, which is why we recommend that you get a credit report from both TransUnion and Equifax to ensure both reports have accurate information. Your creditors and lenders also do their part in ensuring accuracy by submitting regular reports to the bureaus.
Understanding how the credit bureau system works, as well as your rights and obligations, is an important part of maintaining your financial literacy and personal finances.