Have you ever applied for a loan, a credit card or financed the purchase of furniture or household appliances? In this case, you must have a credit report. Here’s what it is and what exactly it contains.
Two major credit agencies, Equifax and TransUnion, prepare a comprehensive bulletin about you. The latter can be consulted by the lenders with whom you will do business.
It is in a way your “pedigree”, an indicator that will allow financial institutions and certain organizations to assess the risk that you represent.
It is on this basis that they will agree to grant you a loan or a credit card, for example.
Credit scores and score
Each credit report has two parts:
Credit scores (R-1 through R-9, or I-1 through I-9, or M-1 through M-9), which describe your repayment habits and payment history. The letters correspond to different categories of financial products (R: revolving credit; I: installment credit; M: mortgage loan). The numbers meanwhile represent a gradation from best to worst.
R-1, for example, means that you pay your bills on time, and R-9 means that you left without leaving an address, that your account was canceled or that you went bankrupt.
“All ratings assigned to consumers remain in their file for a period of six years,” explains Pierre Fortin, Licensed Insolvency Trustee and President of Jean Fortin et Associés.
The score is a score that varies between 300 (the worst) to 900 (the best) reflecting the general quality of your credit file according to a calculation made by the agencies integrating different factors. The higher you are on the scale, the more favorably lenders will look at you, as this means your risk of defaulting on debt repayments is lower.
Each time you apply for a loan (car, mortgage, etc.), a card or a line of credit, know that the lending institution will consult your file.
Do you need to have a good record?
“If your credit report is good, you have a better chance of being granted a lower interest rate,” says Pierre Fortin.
But that’s not all. He adds that landlords also consult credit files before signing a lease with a tenant, and that car or home insurance premiums can also vary depending on the quality of the insured’s file.
Why ? Because a person in debt is less likely to take care of his property – maintaining the roof of his property for example – and therefore more likely to make claims.
But you can’t dig into your credit report at will! You will need to give your permission first. However, this will be required for any request for a loan, quote for insurance, by a landlord, etc.
It is therefore a double-edged sword: if you say no, you could also be denied the good or service you want to obtain.
TIPS
- You should check your file at least once a year and before you apply for credit to make sure it does not contain errors. It will also let you know if you are a victim of fraud if someone is trying to obtain or has obtained credit on your behalf.
- We all have the right to check our own credit report and there is no negative impact to doing so regularly. Moreover, the two agencies have recently facilitated access to information by allowing consumers to consult their score, free of charge. To know more : equifax.ca et transunion.ca
- If you need a helping hand to better understand your credit report, know that companies such as Jean Fortin, counselors and trustees (JeanFortin.com) can help you see things more clearly. You can also find a lot of information on the website of the Financial Consumer Agency of Canada (canada.ca/fr/agence-consommation-matiere-financiere).