How do credit reports work in Canada?
A credit report is a detailed summary of your entire credit history. Lenders, like Meridian, use credit reports as a key source of information when deciding whether to approve you for different types of credit.
In Canada, there are two credit reporting agencies; Equifax and TransUnion. Both agencies refer to their credit reports by different names. At Equifax, a credit report is referred to as a Credit File Disclosure; whereas, TransUnion refers to their report as a Consumer Disclosure.
Regardless of the source, a credit report provides an overview of your current and past debts, up to 7 years, and also includes a record of all payments made.
What's in your credit report?
Since credit reports are so important to your financial health, it’s advisable to frequently check your credit report to help prevent identity theft and to verify that your information remains accurate. This is important, because the contents of your credit report, such as late payments or multiple credit applications can directly impact your credit score.
When you receive a credit report, there are four different types of information available: Identifying Information, Credit Accounts Information, Inquiry Information and Public Record and Collections Information. Each section, and the type of information, is explained further:
This section includes your name, date of birth, address, Social Insurance Number (S.I.N) and, potentially, employment information.
This section lists your credit accounts, commonly referred to as ‘tradelines’, you have opened with lenders. Each of your accounts are reported by the lenders themselves. Additionally, every account in your credit history is given a ‘credit rating’.
A credit rating is an evaluation, by the lender who provided you the credit, of your ability to repay the debt. Ratings range from 1-9 (with 1 representing all payments made on time and 9 representing bills that were never paid). Ratings are also given one of four letters to classify their payment type:
- “I” stands for installment, meaning fixed payments over a certain period.
- “O” is for “open,” meaning you have “opened” credit (a loan or line of credit).
- “R” stands for revolving, meaning payments are contingent on the account balance (i.e. a credit card).
- “M” stands for mortgage loan.
Beyond credit ratings, other information found within this section includes the date you opened the account, the account limit or amount, payment history, account balance and the type of accounts (for example, account types include mortgages, line of credits and/or credit cards).
It’s important to note that some lenders may report to only one, or neither, of the credit reporting agencies and it’s possible for certain accounts to be missing from your credit report.
This section lists all of the companies who have pulled a copy of your credit report, often referred to as making an ‘inquiry’. There are two types of inquiries: soft and hard.
Soft inquiries do not impact your credit score and examples of soft inquiries are personal requests for your own credit history and companies extending you pre-approved offers such as credit cards.
Hard inquiries do impact your credit score and occur when a lender reviews your credit history to make a credit decision, when you have applied for credit. Hard inquiries can remain on your credit report for up to 36 months.
This section lists any public court information, such as filing for bankruptcy, available to the credit agency. It can also include any accounts that are past-due and turned over to a collections agency.