What Does Your Credit Report Say About You?
If you have ever taken out a loan, used a credit card, or financed a vehicle then you have a Credit Report which details your credit history which helps banks and businesses to review your credit worthiness. However, if you have ever obtained a copy of your Credit Report you may have been confused or overwhelmed with the information recorded. A person’s Credit Report usually contains information such as:
- the businesses you have credit with
- when you opened your account
- what your credit limit is
- how much you currently owe
- if you make your payments on time and if you have missed payments
- if you go over your credit limit
This information is managed by Credit Bureaus which are private companies that collect, store, and share information about your credit history. In Canada the main companies are Equifax Canada and TransUnion Canada.
Lenders are constantly reporting on your credit activity to the Credit Bureaus, and when sending information they use two codes the first of which is a letter that identifies the credit type such as:
- I – installment credit i.e. car loan
- O – open status credit i.e. line of credit
- R – revolving or recurring credit i.e. credit card
- M – mortgage loan
The second of which is a number that identifies the payment history type such as:
- 0 – too new to rate
- 1 – paid as agreed
- 2 – late payment, 30 – 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
- 6 – blank
- 7 – making payments under debt management plan with credit counseling agency, Consumer Proposal, or orderly payment of debts
- 8 – repossession
- 9 – bankruptcy, bad debt, or in collections
Accordingly, if a person were to have a particular account with an R2 rating, this would mean that the person missed a payment on that particular credit card at some point. This history remains on your Credit Report on average of 6 years depending on the credit type and province where you reside. There are many regulations in place to protect your credit report, however your Credit Report can be used for the following situations:
- loan applications and extending credit
- debt collection
- job considerations
- insurance premiums or coverage depending on province
- housing rentals etc.
This podcast looks at how increasing your credit card limit or accepting a line of credit can affect your credit score.
We hope the information discussed above has given you some insight into Credit Scores and how they may affect you. We at Allan Marshall & Associates Inc. are always available free of charge to discuss any matters dealing with your credit and debt. Please visit us at www.wecanhelp.ca or don’t hesitate to call us at 1-888-371-8900.