Overview

Building a good credit history is important for your financial health.

Along with millions of other Canadians, you have a credit history that is kept on file by companies called credit reporting agencies. They track how you use credit products, such as credit cards and loans, and pay your bills.

This information is used to create your credit report and credit score. These are some of the main tools lenders use when they decide whether they will lend you money and how much they will charge you to borrow it. Employers and landlords may also use credit reports to get a sense of your reliability.

You have the right to see your own credit report. And there are ways you can get it for free.

Knowing what is in your report is important. If you have a poor credit history, it could be harder for you to get a credit card or a loan. You could have to pay more to borrow money. It could even affect your ability to rent housing or get hired for a job.

You can also use your credit report to check for signs of identity theft.

What is a credit report?

Your credit report is a summary of your credit history. If you have ever used a credit card, taken out a personal loan, or used a “buy now, pay later” offer, you have a credit history.

Your credit report is created when you borrow money or apply for credit for the first time. Lenders send information about your accounts to the credit reporting agencies. Your credit report also includes personal information that is available in public records, such as a bankruptcy.

Your credit report contains factual information about your credit cards and loans, such as:

when you opened your account

how much you owe

whether you make your payments on time

whether you miss payments

whether you go over your credit limit.

Mobile phone and Internet accounts may be reported, even though they are not credit accounts.

Checking and savings accounts that have been closed “for cause,” due to money owing or fraud committed by the account holder, can also be included.

What is a credit score?

A credit score is a three-digit number that is calculated using a mathematical formula based on the information in your credit report. You get points for actions that demonstrate to lenders that you can use credit responsibly. You lose points for things that show you have difficulty managing credit. To find out what counts toward your credit score, see the section called “How to improve your credit score”.

In Canada, credit scores range from 300 to 900 points. The best score is 900 points.

Lenders and credit reporting agencies produce credit scores under different brand names, such as Beacon, Empirica and FICO®.

Your score will change over time as your credit report is updated.

Businesses use your credit report and score to see how risky it would be for them to lend you money. It is up to each lender to decide on the lowest score you can have and still borrow money from them. Lenders may also use your score to set your interest rate and credit limit. If you have a high credit score, you may be able to get a lower interest rate on loans, which can save you a lot of money over time.

While they are very important, credit scores are usually not the only thing a lender will look at. Often, they will also consider other factors, such as your income, job or any assets you own.

Why might the credit score I receive be different from one a lender is using?

A credit score you order for yourself may not be the same as a score produced for a lender.

This can happen even if they are created at the same time using the same information in your credit report because there are different types of credit scores that are designed to meet the needs of lenders.

A lender may put more weight on certain information depending on the reason it is calculating your score. For example, it may want to assess your risk of becoming bankrupt or determine whether you qualify for a mortgage.

Your own credit score should still be in the same range as a score created for a lender.

Who creates my credit report and score?

Credit reporting agencies are private companies that collect, store and share information about how you use credit. An agency is also called a “credit bureau” or just a “bureau.”

These agencies are governed by regulations that cover many parts of their business, such as who is allowed to see your credit report and what it can be used for.

In Canada, there are two main credit reporting agencies: Equifax Canada and TransUnion Canada.

These agencies sell credit reports to their members, which include banks, credit unions and other financial institutions, credit card companies, auto leasing companies and retailers. These businesses use your credit report to help them make their decisions about you.

Other organizations also use it to check your use of credit and personal trustworthiness. Those allowed to use your credit report include mobile phone companies, insurance companies, governments, employers and landlords.

When a lender or other organization “checks your credit” or “pulls your report,” it is accessing your credit report at the credit reporting agency. This is usually recorded on your credit report as an “inquiry.”

Lenders provide the information in your credit report to the credit reporting agencies. Other sources of information include collection agencies, offices that handle child support and public records filed with courthouses.

Take credit for your actions!

Do you have a strong credit score? Use this to your advantage when you negotiate for a loan. Point out that you represent a lower risk to the lender and ask for a lower interest rate or better terms.

Who can use my credit report and score?

There are regulations in place to protect your personal information, including your credit report. Usually, your credit report can only be used to:

lend money or extend credit to you

collect on a debt you owe

consider you for rental housing or for a job

provide you with insurance (some provinces have restrictions)

meet a direct business need.

Lenders, employers or landlords can only use your credit report when you give your consent or, in some provinces (including Nova Scotia, Ontario, Quebec, Prince Edward Island and Saskatchewan), after they tell you they will be checking your report.

Usually, when you sign an application for credit, you allow the lender to access your credit report. Your consent generally lets the lender use your credit report when you first apply and anytime afterward while your account is open.

In many cases, your consent also lets the lender share information about you with the credit reporting agencies if your application is approved.

Some provincial laws permit government representatives, including judges and police, to see parts of your credit report without your consent.

In some provinces, your credit score cannot be used to decide whether you qualify for insurance or to determine how much you will be charged for insurance coverage. In some cases, insurers are not allowed to use your credit score when deciding whether to offer you specific types of coverage, such as auto or mortgage insurance.

Some provinces require lenders and others to tell you if your credit report led to you being refused for a benefit or service, or if you have to pay more for it.

For more information about provincial and territorial laws, contact the government office that handles consumer affairs in your area.

How long does information stay on my credit report?

By law, negative information can only be kept on your credit report for a certain length of time. For most information, the maximum is six or seven years. The exact amount of time varies by category and by province or territory. Positive information, such as accounts that you paid on time, may be kept longer.

Equifax Canada and TransUnion Canada keep your information for different lengths of time, up to the maximum time limits allowed by provincial laws.

Type of information How long agencies keep information Date when agencies start counting

Credit transactions

Negative information about accounts such as credit cards, lines of credit and loans

Also called “trades” or “trade lines” by credit reporting agencies

6 years

Equifax counts from date of last activity (for example, a payment you made)

TransUnion counts from date of first delinquency—the date you first defaulted on the account (for example, by making a late payment) without returning to good standing

Type of information How long agencies keep information Date when agencies start counting

Secured loans

Loans backed by an asset, such as a mortgage, a car lease or loan

6 years

Equifax only: 7–10 years in P.E.I.

Equifax counts from date of filing

TransUnion counts from date of first delinquency

Banking items

Negative information, including:

o chequing and savings accounts closed “for cause” due to money owing or fraud committed by the account holder

o bad cheques (also called non-sufficient funds or NSF)

6 years

Equifax counts from date of transaction or default

TransUnion counts from date of write-off or date closed, whichever is sooner

Inquiries

Recorded when lenders and others access your credit report

For more information on “hard” and “soft” inquiries, see the section called “Hard hits” versus “soft hits”

Equifax: 3 years

TransUnion: 6 years

Counted from date inquiry is made

Type of information How long agencies keep information Date when agencies start counting

Judgments

Legal judgments against you and other information in public records

6 years

Equifax: 7–10 years in P.E.I.

TransUnion: 7 years in Ontario, Quebec, New Brunswick and Newfoundland and Labrador; 10 years in P.E.I

Counted from date of filing

Collections

Debts sent to collection agencies

6 years

Equifax counts from date the debt is assigned to a collection agency

TransUnion counts from date of first delinquency (when the account became delinquent with the original lender, not when it was sent to a collection agency)

Registered items

Items registered in public records, such as a lien against your property

Equifax: 6 years,

except in P.E.I. where it is 7–10 years

TransUnion: 5 years

Counted from date of filing

Type of information How long agencies keep information Date when agencies start counting

Bankruptcy

Legal procedure used as a last resort if you are unable to repay your debts

6 years

TransUnion only: 7 years in Ontario, Quebec, New Brunswick, Newfoundland and Labrador, and P.E.I

Counted from date of discharge.

If not discharged:

o Equifax keeps for maximum of 7 years from filing date

o TransUnion: no time limit

Multiple bankruptcies

Legal procedure used as a last resort if you are unable to repay your debts

14 years

Counted from date of discharge for each bankruptcy

Consumer proposals

Formal procedure to repay your debts, arranged by trustee in bankruptcy or other authorized agent

3 years

Equifax counts from date paid.

TransUnion counts from date satisfied or 6 years from filing date, whichever is sooner

If not paid or satisfied, maximum is 6 years from filing date

Orderly payment of debts (OPD)

Also known as a consolidation order

Formal procedure to repay your debts, arranged through a court

Only available in Alberta, Saskatchewan and Nova Scotia

Equifax: 3 years

TransUnion: OPD itself is not reported

Equifax counts from date paid

TransUnion: individual accounts included in OPD stay on file for 2 years from date OPD is satisfied or 6 years from date of first delinquency, whichever is sooner

Type of information How long agencies keep information Date when agencies start counting

Debt management program (DMP) with credit counselling agency

Program to help you repay your debtsNote: credit counselling by itself (without DMP) is not noted on your credit report

Equifax: 3 years

TransUnion: DMP itself is not reported

Equifax counts from date paid. If not paid, counts for a maximum of 6 years from filing date

TransUnion: individual accounts included in DMP stay on file for 2 years from date DMP is satisfied or 6 years from date of first delinquency, whichever is sooner

Remarks

Statements you can add to your credit report, including:

o consumer statements

o fraud alerts

o identity verification alerts.

6 years

Counts from date reported to agency

How are my debts rated on my credit report?

Lenders may use codes when they send information to the credit reporting agencies about how and when you make your payments. These codes can have two parts: a letter and a number. For example, an account may be coded as R2. The letter stands for the type of the credit you are using.

Letter Meaning Example

I Installment credit

You borrow money for a specific period of time and repay it in fixed amounts, on a regular basis, until the loan is paid off.

Car loan

O Open status credit

You can borrow money when you need to, up to a certain limit.

Line of credit

R Revolving or recurring credit

You can borrow money up to your credit limit on an ongoing basis. You make regular payments in varying amounts depending on the balance of your account.

Credit card

M Mortgage loan

Mortgage information may be included on your credit report.

Mortgage

The codes also use numbers that range from 1 to 9. The best rating is 1. It means you pay your bills within 30 days of the billing date. Ratings of 1 will help you achieve a strong credit score.

Any number higher than 1 will likely hurt your credit score. The worst rating you can receive is 9. It usually means the lender has written your account off or sent it to a collection agency.

Number Meaning

0

Too new to rate

Approved, but not yet used

1

Paid within 30 days of billing

Pays as agreed

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, but not yet rated “9”

6

This code is not used

7

Making regular payments under a consolidation order, orderly payment of debts, consumer proposal or debt management program with a credit counselling agency

8

Repossession

9

Written off as a “bad debt”

Sent to collection agency

Bankruptcy

Each of your credit accounts will have one of these codes. The codes can be different depending on how you make your payments for each account.

For example, if you have a credit card account that you paid on time, it will be reported as “R1.” If you also have a line of credit, and you missed your payment by 45 days, it would show up as “O2.”

How can I build my credit history for my credit report?

It is important to begin building your credit history early. If you do not have a credit history, it is much harder for lenders to make a decision about you, since they have nothing to base it on.

One of the best ways to build a credit history is to apply for a credit card and make your payments on time.

It can sometimes be hard to get a regular credit card if you are a young person, a recent immigrant or have had trouble with credit in the past.

An option is to apply for a secured credit card. You need to provide the credit card issuer with a deposit. Usually, the amount required for a deposit is equal to the credit limit for the credit card. When you make payments on the balance of a secured credit card, it will be reported to the credit reporting agencies in the same way as a regular credit card. This can help you build a credit history or rebuild a poor one.

Are secured credit cards and prepaid cards the same thing?

No, they are not the same. A secured credit card can help you establish a credit history. However, a prepaid card will not help you build a credit history because your use of it is not reported to the credit reporting agencies.

How to improve your credit score

The actual formulas used to calculate credit scores are the property of private companies and are not available to the public. This means it is not possible to know exactly how many points your score will go up or down based on the actions you take.

However, the 5 main factors that are used to calculate your score include:

Payment History

This is the most important factor for your credit score. It shows:

when you paid your bills

late or missed payments

debts you did not pay that were written off or sent to a collection agency

whether you have declared bankruptcy.

Your score will be damaged if you:

make late payments—the longer it takes you to make your payment, the worse the impact on your credit report and score will likely be

have accounts that are sent to a collection agency

declare bankruptcy

withhold payments due to a dispute and the lender reports your payments as late.

With certain financial products, any payments you make on time will not be counted and will not improve your credit score. However, if you miss payments and your account is sent to a collection agency, this can be included and will damage your credit score. These products include:

checking and savings accounts

student loans

prepaid cards (these are not the same as secured credit cards).

Telecommunications accounts, such as mobile phone and Internet, are exceptions. Payments you make on time as well as late payments may be considered for your credit score.

Tips to improve your credit score

Always make your payments on time. If you cannot pay the full amount, make at least the minimum payment.

If you think you will have trouble paying a bill, contact the lender right away. See if you can work out a special arrangement to repay your debt.

Use of Available Credit

This is the second most important factor. It is also called “credit utilization.”

To figure out your available credit, add up the credit limits for all your credit products, such as credit cards, lines of credit and other loans.

What counts toward your credit score is how much of your available credit you actually use, not your credit limits by themselves.

When you use a large percentage of your available credit, lenders see you as a greater risk, even if you pay your balance in full by the due date.

Tip to improve your credit score

Try to use less than 35 percent of your available credit.

For example, if you have a credit card with a limit of $5,000 and a line of credit with a limit of $10,000, your available credit is $15,000. Try not to borrow more than $5,250 at any time (35 percent of $15,000).

3. Length of Credit History

The longer you have had an account open and used it, the better it is for your score.

Your credit score may be lower if:

you have credit accounts that are relatively new

you close your older accounts and your remaining credit accounts are newer—for example, if you close a credit card account and transfer the balance to a new card.

Tip to improve your credit score

Consider keeping an older account open even if you no longer need to use it, especially if there is no annual fee. Use it from time to time to keep it active.

4. Number of Inquiries

When lenders and others ask a credit reporting agency for your credit report, it is recorded as an inquiry. This usually happens when you apply for credit.

It is normal and expected to seek credit every so often. But if there are too many inquiries on your credit report, lenders may be concerned. It can seem like you are desperately seeking credit or that you are trying to live beyond your means without the ability to pay back the money you want to borrow.

“Hard hits” versus “soft hits”

Inquiries that are recorded on your credit report and count toward your credit score are sometimes called “hard hits.” Anyone who views your credit report will see these inquiries. An application for a credit card is an example of a “hard hit.” Rental and employment applications may be treated as “hard hits.”

“Soft hits” are the opposite. Only you can see “soft hits.” These inquiries do not affect your credit score in any way. Examples of “soft hits” include:

requesting your own credit report

businesses asking for your credit report to update their records about an existing account you have with them. They do this to see whether you qualify for promotions, credit limit increases and so on.

Will shopping around for a car or mortgage hurt my score?

When you are shopping around for a car or a mortgage, try to do it within a two-week period. All inquiries related to auto or mortgage loans made during this time are usually combined and treated as a single inquiry.

Tip to improve your credit score

Limit the number of times you apply for credit in a short period of time. It is a good idea to seek credit only when you really need it.

5. Types of Credit

Your score may be lower if you only have one type of credit product, such as a credit card.

It is better to have a mix of different types of credit, such as a credit card, auto loan, line of credit or other loan. It can even help if you have a second but different type of credit card, such as an account with a store.

Tip to improve your credit score

Having a mix of credit products could get you more points, but don’t go overboard! Make sure you can afford to pay back any money you borrow. Otherwise, you could end up hurting your score by taking on more debt than you can handle.

How to correct errors and check for fraud

Check your credit report at least once a year for errors and signs of identity theft. Think of it as an annual checkup for your financial health!

You have the right to dispute any information on your credit report that you believe is wrong.

You can ask the credit reporting agencies to correct errors. It’s free.

Watch out for:

mistakes in your personal information, such as wrong mailing addresses or incorrect date of birth

errors in credit card and loan accounts, such as a payment you made on time that is shown as late

negative information about your accounts that is still listed after the maximum number of years it is allowed to stay on your report

accounts listed that you never opened yourself, which could be a sign of identity theft.

Why do errors matter?

They may give lenders the wrong impression. You could be turned down for an application or receive a lower credit score than you should have. Even errors that seem minor, such as a misspelled name or a wrong address, could cause problems when you apply for credit.

What cannot be changed?

You cannot change factual, accurate information related to a credit account. For example, if you missed payments on a loan or a credit card, paying the debt in full or closing the account will not remove the negative history. Negative information will only be removed after a certain amount of time.

Watch out for “credit repair” companies that claim they can eliminate negative information, for a fee, before the date it would normally be removed from your credit report. This is not possible.

Steps to correct errors

Step Actions you can take

1. Support your case Gather receipts, statements and other documents related to your credit accounts. You may need them to prove your claim.

2. Contact the credit reporting agencies Use their forms for correcting errors and updating information. Do this for both Equifax Canada and TransUnion Canada.

Before the agencies can make any changes, they first need to check your claim with the lender that reported the information.

If the lender agrees there is an error, the agencies will update your file. However, if the lender confirms the information is correct, the agencies will not make any changes.

3. Contact the lender You may be able to speed up the process by contacting the lender yourself about the error. Ask the lender to verify its files and provide the credit reporting agencies with updated information.

4. Escalate your case Not satisfied with the results of the investigation? Ask to speak with someone at a higher level at the credit reporting agency or the lender.

If the lender is a federally regulated financial institution, and it will not correct the error, ask for information on its complaint-handling process.

5. Add a consumer statement If you still are not satisfied, ask the credit reporting agencies to add a consumer statement. This lets you provide details about an item on your credit report, using up to 100 words (or 200 words in Saskatchewan). It’s free of charge.

Lenders and others who review your credit report may consider your consumer statement when they make their decisions.

How can I make a complaint?

If you feel you have not been treated properly by a credit reporting agency, you can make a written complaint to the office of your provincial or territorial government that handles consumer affairs.

How can I use my credit report to protect myself against fraud?

Look for accounts that do not belong to you. It could mean you have been targeted by fraudsters who have applied for a credit card, mortgage or other loan in your name.

Have you been a victim of fraud?

Ask the credit reporting agencies to put a fraud alert on your file.

It tells lenders to contact you and confirm your identity before they approve any applications for credit. The aim is to prevent any further fraud from happening.

How can I add an identity verification alert?

Under provincial law in Manitoba and Ontario, you have the right to add an identity verification alert, which asks lenders to contact you to confirm your identity before they approve any credit applications.

You do not need to be a victim of fraud to do this. There may be a small fee to add it.

How to order your credit report and score

You can order your credit report from the credit reporting agencies by mail, fax, telephone, online or in person. You can order your credit score online. Contact information for Equifax Canada and TransUnion Canada is listed below.

Equifax Canada and TransUnion Canada may have different information about you in their files, so you should order your credit report from both agencies at least once a year.

Consider requesting your report from one agency and then waiting six months before you order from the other agency. By spacing out your requests in this way, you may be able to detect any problems sooner.

How can I get my credit report for free?

Your free credit report is called a “credit file disclosure” by Equifax Canada and a “consumer disclosure” by TransUnion Canada. It does not include your credit score.

To get your credit report free of charge:

you may order it by mail, fax, telephone or in person

you must receive it by mail or in person.

If you choose to access it online, you will have to pay a fee.

To order by mail or fax:

make your request in writing using the forms provided by Equifax Canada and TransUnion Canada

provide copies of two pieces of acceptable identification.

To order by telephone:

call the credit reporting agency and follow the automated prompts

confirm your identity by answering a series of personal and financial questions and providing your Social Insurance Number (SIN) and/or a credit card number.

To order in person:

visit the office of the credit reporting agency

show two pieces of acceptable identification.

Does my free credit report include my credit score?

No, it does not include your credit score.

How can I order my credit report or score for a fee?

If you want to receive your credit report right away, you can pay a fee to get it online.

There is a fee to order your credit score from the credit reporting agencies.

Be wary of other organizations that offer free credit scores. To get the “free” score, you may have to sign up for a paid service. Fraudsters may offer free credit scores in an attempt to get you to share your personal and financial information.

How can I contact Equifax Canada?

All provinces and territories—Equifax Canada

Mail Equifax Canada

Consumer Relations Department

P.O. Box 190, Station Jean-Talon

Montreal, QC H1S 2Z2

Phone 1-800-465-7166

(toll-free)

Fax 514-355-8502

In person Equifax Canada

5700 Yonge St.

Concourse Level

Toronto, ON M2M 4K2

Online www.equifax.ca

How can I contact TransUnion Canada?

All provinces and territories except Quebec—TransUnion Canada

Mail TransUnion Canada

Consumer Relations Centre

P.O. Box 338, LCD 1

Hamilton, ON L8L 7W2

Phone 1-800-663-9980 (toll-free)

Fax 289-288-0030

Online www.transunion.ca

In person Newfoundland and Labrador Consumer Relations

55 Bond St., Suite 202

St. John’s, NL A1C 5W2

Nova Scotia Consumer Relations

6389 Coburg Rd., Suite 305

Halifax, NS B3H 2A5

Ontario Consumer Relations

3115 Harvester Rd., Suite 201

Burlington, ON L7N 3N8

Prince Edward Island Consumer Relations

51 University Ave., Suite 103

Charlottetown, P.E.I. C1A 4K8

Mail TransUnion Canada

Consumer Relations

P.O. Box 1433, Station St-Martin

Laval, QC H7V 3P7

Phone 1-877-713-3393 (toll-free)

Fax 514-334-8698

Online www.transunion.ca

In person TransUnion Canada

1 Place Laval, Suite 370

Laval, QC H7N 1A1

The information contained above was obtained from a document on the website for the Financial Consumer Agency of Canada called “Understanding your Credit Report and Credit Score” and may be viewed in its entirety by visiting www.fcac.acfc.gc.ca