UNDERSTANDING YOUR CREDIT REPORT

Most of us hear the terms credit report and credit score but do we understand what they are and their importance?  In today's society, your credit report is a valuable piece of information. It can mean the difference between you receiving financing or not. Every time you apply for credit they will check your credit report and make a decision based on it’s content. Your credit file is created when you first borrow money or apply for credit. On a regular basis, these lenders will send specific factual information related to the financial transactions they have with you to credit reporting agencies. Your credit history is recorded in files maintained by Equifax Canada and Trans Union Canada. It is possible to obtain your credit file for free, consult the agency's website in order to obtain more information.

Credit Score
Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. There are many different ways to work out credit scores. The credit-reporting agencies Equifax and Trans Union use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk is for the lender.

Credit Rating
Some credit-reporting agencies report the lenders rating of each of your credit history items on a scale of 1 to 9. A rating of "1" means you pay your bills within 30 days of the due date. A rating of "9" means that you never pay your bills at all or that you have written off debt. A letter will also appear in front of the number: for example, I2, O2, R2.

• "I" means you were given credit on an installment basis, such as for a car loan, where you borrow money once and repay it in fixed amounts, on a regular basis, for a specific period of time until the loan is paid off.
• "O" means you have open credit such as a line of credit, where you borrow money, as needed, up to a certain limit and the total balance is due at the end of each period. This category may also include student loans, for which the money may not be repaid until you are out of school.
• "R" means you have "revolving" credit, where you make regular payments in varying amounts depending on the balance of your account, and can then borrow more money up to your credit limit. Credit cards are a good example of "revolving" credit.

The most common ratings are "R" ratings. The "R" indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9. The R ratings are a coding system that translates "on time", "one month late", "two months later etc.

To get more information on your credit report, contact the agencies below:

Contact Equifax Canada   1-800-465-7166   http://www.equifax.com/home/en_ca

Contact Trans Union Canada   1-866-525-0262   http://www.transunion.ca