Credit history is often a confusing area for Canadians. We hear misinformation from others, misunderstand what we’ve read, or mistake our American neighbours’ laws for our own. To help set the record straight we’ve outlined some credit report and credit score basics:
What is a Credit Report?
Your credit report is a summary of your credit history that includes personal information available via public records – if you’ve ever used any sort of credit you will have a credit history. It will also contain information about your debts; when you opened the account, the balance, whether you make payments on time, if any are missed and whether or not you exceed your credit limits.
What is a Credit Score?
Your credit score is calculated based on the information contained in your credit report. You’ll gain points for favorable actions showing lenders you can manage your credit well, and lose points for actions that demonstrate difficulties. Canadian credit scores range from 300 (low) to 900 (highest).
Individual lenders will have their own policies on what the lowest permissible score is in order for them to extend you credit. This score can also be used to set interest rates and credit limits. Credit scores can vary between lenders because they may have different scoring systems, specific to their institution.
How long will Debts stay on my Credit Report?
The maximum amount of time negative information can be kept on your credit report varies by province and credit bureau, although for most it will be six or seven years; positive information may be kept for longer. Some people are surprised to learn just how long transactions can be reflected. Common examples include:
- Can be kept on agency information for 6 years (varies per agency/province): Chequing accounts closed due to money owing, cheques returned for insufficient funds, debts sent to collection agencies, negative information about accounts, loans backed by an asset (such as a car loan), legal judgments, first-time bankruptcy.
- Can be kept on agency information for 3 years (varies per agency/province): Consumer Proposals, Orderly Payment of Debts, Debt Management Programs with credit counseling agencies.
It’s important to remember that credit scores and reports are generally not the only factors a lender will consider when extending you credit. Your income, assets you have and your relationship with the financial institution can also be taken into account. If the state of your credit score or report is making it difficult for you to obtain the credit you want, have a read of our ‘Do’s and Don’ts’ when it comes to rebuilding your credit.