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.
Credit reporting agencies are responsible for storing all this information about your financial history. In Canada there are two main credit bureaus:
Not all loans are reported on your credit report. For example, payday loan lenders do not report loan and payment activity to the credit bureaus. Also, creditors don’t always report to both agencies. That’s why we always recommend getting a credit report form both credit bureaus to get a complete picture of your reported credit history.
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.
What Are The Possible Credit Ratings?
On your credit report in Canada, each creditor assigns you a credit score on a scale from 1 to 9. R1 is the best credit rating and R9 is the worst. Here are their meanings:
R1 – You pay that creditor’s loan on time.
R2 – Your payments are 30 days late.
R3 – Your payments are 60 days late.
R4 – Your payments are 90 days late.
R5 – Your payments are 120 days late.
R6 – Typically not used.
R7 – You are in a consumer proposal, consolidation order, or debt management plan (offered through a non-profit credit counselor).
R8 – It is used to show that a secured creditor has taken steps to realize on their secrity (e.g. repossessed your car). It rarely appears on a credit bureau report as after they take your car they generally commence legal or collection action which is rated R9.
R9 – A bad debt placed for collection or considered uncollectible, or you are bankrupt.
As you can see, you could have different credit ratings at one time, based on how you handle different debts.
How Does A Consumer Proposal or Bankruptcy Affect My Credit Rating?
As soon as you file a consumer proposal, your credit rating will be revised to either an R7 or an R9 and it will probably remain at this rating until the proposal is completed. Ater you complete your proposal, a note indicating you have completed your consumer proposal will appear in your credit record, typically for three more years. That means that your consumer proposal affects your credit record for up to eight years from the date that you filed the proposal to creditors, depending on the length of your payment period.
For example, if you file a proposal where you are making monthly payments for three years, the proposal remains on your credit report for a total of six years.
Note: A first bankruptcy will show up on your credit report for a period of six to seven years depending on the credit bureau’s policy.
How Can I Correct An Inaccuracy In My Credit Report?
First you will need to complete a Consumer Credit Report Update Form (see our page on how to get a copy of your credit report for contact information). Once complete begin by contacting the credit bureau, either by phone or by writing them.
After they receive your call or letter request, they will begin the Dispute Resolution process.
First, they review and consider the information you have sent in about your dispute. If this initial review does not resolve the problem, they will continue your investigation. This involves contacting the submitter of the disputed information on your behalf to review the details. They will investigate and report their conclusions to the credit bureaus. Based on their findings, the credit bureaus may make changes to your credit file. If the disputed information is correct, Equifax will not make any changes.
The credit bureaus will send you a revised credit report if changes are made as a result of the Dispute Resolution process.
The credit bureaus will also send your revised credit file to any company that requested your credit file 60 days prior to the change. In some cases, it may be a period longer than 60 days.