The Key to Financial Stability: A Brief Guide to Understanding Credit Reports

I.   What is a Credit Report?

A credit report is a comprehensive summary of your credit history. A credit report contains a detailed record of your money or credit borrowing and repayment, and it is compiled by credit bureaus, also known as credit reporting agencies.

A credit report includes a credit score, which is a three-digit number that demonstrates your ability to manage credit and a lender’s risk in lending money to you. You gain points for managing your credit responsibly and lose points for failing to manage your credit.

 II.   Why are Credit Reports Important?

Credit reports are crucial given they disclose information about your financial behavior and creditworthiness. Here are some examples when credit reports are especially important:

1. Lending Decisions: Lenders review your credit reports when you apply for a loan, credit card, or mortgage. A positive credit report may give you better interest rates and loan terms, such as higher credit limits.
2. Job Applications: Some employers may consider your credit reports, so a strong credit history may positively contribute to your job prospects.
3. Renting or Leasing: Landlords and property managers frequently review your credit reports when evaluating potential tenants. A positive credit history can improve your chances of securing a lease for your rental property.
4. Insurance Premiums: Insurers may charge you lower insurance premiums for good credit.

 III.  What is Included in a Credit Report?

A credit report includes the following details:

1. Personal Information:
   • Your name, date of birth, Social Insurance Number (SIN), and your current and previous phone numbers, addresses, and employers
2. Credit Account information:
   • Information about your closed and active accounts in relation to loans, credit cards, and mortgages, including details about credit limits, payment history, and account balances.
   • Any bankruptcies, liens, or judgements against you

3. Credit Inquiries:

• • A credit report shows both when you check your own credit and when the lenders check your credit prior to making a lending decision.

IV.   How to Access Your Credit Report?

There are multiple ways you can access your credit report through Equifax and TransUnion:

1. Online:
   • Gain immediate access to your credit report online for free through Equifax: Check Your Equifax Credit Score and Report | Equifax Canada
   • Gain immediate access to your credit report online for free through TransUnion: Free Annual Credit Report | TransUnion
2. By Mail:
   • To order your credit report by mail, fill out the forms provided by Equifax and/ or TransUnion and make a postal request with either or both credit bureau(s) along with copies of two pieces of acceptable identification, such as passport or a driver’s licence.
3. By Phone:
   • Request your free credit report from Equifax by phone by calling 1-800-465-7166.
   • Request your free credit report from TransUnion by phone by calling 1-800-663-9980.
   • Both credit bureaus may ask you personal and financial questions to confirm your identity. It is important to follow the provided instructions.

V.  How to Improve Your Credit Report?

Improving your credit report is crucial to your financial well-being and to gain trust from lenders. Here are some ways you can improve your credit report:

1. Review your credit report regularly to check for accuracy
2. Make payments on time and in full
3. Limit frequent credit applications and refrain from opening multiple new accounts within a short time frame
4. Maintain low credit card balances in relation to your credit limit

 

~Vicky Liu
Law Student