Your credit report is a snap shot of your credit history. Lenders send information and history about the credit accounts you hold with them to the credit bureaus. Credit bureaus create and update your report.
There are two credit bureaus in Canada: Equifax and TransUnion.
Your credit score is a 3-digit number that is filtered from your credit report. It measures how well you are managing your credit and if it’s risky for other lenders to lend you money. You earn points towards your score if you are using your credit responsibly and lose points if you are having difficulty managing your debt load. There is no simple formula to understand how credit bureaus and lenders calculate your credit score, however here are some factors that can affect your score:
• Length of time you have had credit
• How long each credit product has been in your history
• If you carry a balance on credit cards
• If you regularly miss payments
• Amount of outstanding debt
• If you are close, at or above your approved limits
• Number of recent credit applications
• Type of credit products you are using
• If any debt has been sent to a collection agency
• Record of bankruptcy or insolvency
It is important to check your credit report and ensure any errors are reported and corrected. Your credit report directly impacts your future ability to borrow. Errors could be a mistake from the lender or it could be a sign that someone is trying to steal your identity and open credit products in your name. It is recommended that you check your report at least once a year.
Two Canadian sources to view and manage your credit score: Equifax and TransUnion (Both comparable in costs), first month is $4.95 and increases to $19.95/ monthly. They provide access to your credit report and score, alerts, credit and debt analysis and options for identity theft assistance. A sub-set of their services are available for free. www.transunion.ca www.equifax.ca
Financial information found on your credit report:
• NSF payments & bad cheques
• Closure of bank accounts due to money owing or acts of fraud
• All credit you use • Bankruptcy, credit proposals or court orders against you
• Any debt items that have been sent to collection agencies
• Inquiries – lenders who have requested your credit report in the last 3 years
• Items that have been registered for collateral (car lien)
• Consumer statements, fraud and identity alerts
Each credit product will contain information on:
• When the account was opened
• How much is owing
• Do you make your payments on time
• Have you missed any payments
• Has the debt been transferred to a collection agency
• Has the credit gone over its approved limit
• Personal information
Lenders or debt issuers send information to TransUnion and Equifax on the history of your repayments. They use universal codes which outline the following:
Letter = type of credit being used
Number= when you make payments
| I | Installment Credit – specific period of time and make regular payments in fixed amounts until paid | Example- car loan, personal loan |
| O | Open Credit | Example- Line of Credit |
| R | Revolving Credit – borrow funds on an ongoing basis up to an approved amount. Borrow- repay-borrow | Credit Card |
| M | Mortgage | Mortgage |
| 0 | Brand new, too new to rate |
| 1 | Paid as agreed Paid within 30 days |
| 2 | Late Payment 31-59 days late |
| 3 | Late Payment 60-89 days late |
| 4 | Late Payment 90-119 days late |
| 5 | Late payment More than 120 days late |
| 6 | NOT USED |
| 7 | Payments being made under debt management options |
| 8 | Repossession |
| 9 | Written off Sent to collections Bankruptcy |
Banks, credit unions, credit card companies, cell phone providers, employers and landlords to name a few are able to request a copy of your credit report to decide whether or not they should lend you money, consider you for a rental or provide a job. You must however provide consent and give permission for an individual or company to check your credit.
Next, we will focus on ways to maintain and improve your credit score.
We hope you will find this information valuable and will increase your financial confidence. You can always find these articles on our website www.actionfinancialgroup.com.
Karin Rimnyak, Certified Financial Planner®
Investment Advisor
Insurance Advisor, Action Financial Group Ltd.
David Dryburgh, Certified Financial Planner®
Investment Advisor
Insurance Advisor, Action Financial Group Ltd.
Ian Barrie, Certified Financial Planner®
Investment Advisor
Insurance Advisor, Action Financial Group Ltd.
This information has been prepared by Karin Rimnyak who is an investment Advisor for iA Private Wealth. Opinions expressed in this email are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth. iA private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
