Understanding your credit score, credit rating, and credit report is essential for managing your financial health. These tools are used by lenders to determine whether to approve you for credit cards, loans, or mortgages, and to set the interest rates you’ll pay. While using credit responsibly, making timely payments, and avoiding missed payments are key to maintaining good credit, there’s much more to learn. Below, we answer common questions about credit to help you navigate this complex topic.
What’s the Difference Between a Credit Report, Credit Score, and Credit Rating?
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Credit Report: A detailed history of your credit usage, including loans, credit accounts, and payment history. It also includes personal information like your name, address, and employment history.
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Credit Score: A numerical rating (ranging from 300 to 900) that reflects your creditworthiness. A higher score indicates better credit health.
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Credit Rating: A scale from 0 to 9, where 0 means no credit history and 9 indicates significant credit issues, such as bankruptcy or debt write-offs.
Does My Credit Score Solely Determine My Financial Health?
No, your financial health is determined by multiple factors, including income, savings, debt levels, and spending habits. Lenders consider all these aspects when evaluating your loan or credit applications.
What’s Included in My Credit Report?
Your credit report contains:
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Identifying Information: Name, date of birth, SIN, address, etc.
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Employment History: Current and previous employers.
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Credit Accounts (Trade Lines): Details of credit cards, loans, and other credit products.
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Public Records: Bankruptcies, consumer proposals, liens, civil judgments, and collections.
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Inquiries: Records of when lenders or institutions check your credit.
What Should Not Be Included in My Credit Report?
Your credit report should not include personal details like age, ethnicity, religion, marital status, or salary. If you see this information, request a correction immediately.
Who Can Access My Credit Report?
Only entities you authorize, such as lenders or creditors, can access your credit report. They may perform regular checks if you’ve granted permission.
How Often Should I Check My Credit Report and Score?
Check your credit report and score at least once a year. If you’re applying for credit frequently, check it more often to monitor for inaccuracies or fraud. Credit monitoring services can provide monthly updates.
Where Should I Check My Credit Report and Score?
Check both Equifax and TransUnion, as they may have different information. Note that free credit reports don’t include your credit score.
Does Checking My Credit Score Hurt My Credit?
No, checking your own credit (a soft inquiry) doesn’t affect your score. However, hard inquiries (when lenders check your credit during an application) can impact your score if done frequently.
Can Multiple Credit Applications Lower My Credit Score?
It depends. Multiple applications for the same type of credit (e.g., a mortgage or car loan) within a short period are typically treated as a single inquiry. However, applying for multiple credit cards in a short time can lower your score.
What Should I Look for When Reviewing My Credit Report?
Look for inaccuracies, such as incorrect account details, fraudulent activity, or debts you don’t recognize. Dispute errors with the credit bureaus to have them corrected.
What Habits Can Hurt My Credit Score?
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Missed Payments: Late or missed payments stay on your report for up to six years.
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High Credit Utilization: Using more than 30% of your credit limit can lower your score.
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Frequent Hard Inquiries: Applying for multiple credit products in a short time can negatively impact your score.
What Should I Do If a Missed Payment Goes to Collections?
Resolve the debt as quickly as possible. While the collection record will remain, paying it off reduces its impact on your credit score.
How Do I Remove Bad or Inaccurate Information from My Credit Report?
Dispute inaccuracies with Equifax and TransUnion. They will investigate and remove errors if confirmed. Regularly reviewing your report helps catch and resolve issues early.
Does Credit Utilization Affect My Credit Score?
Yes, keeping your credit utilization below 30% is ideal. High utilization suggests financial strain and can lower your score.
What Factors Make Up My Credit Score?
Your credit score is based on:
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Payment History (35%): Timely payments improve your score.
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Credit Usage (30%): Lower balances relative to your limit boost your score.
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Age of Accounts (15%): Older accounts demonstrate a longer credit history.
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Bankruptcy or Consumer Proposals (10%): These significantly lower your score but can be recovered over time.
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Credit Applications (10%): Frequent applications can reduce your score.
Can Rent Payments Improve My Credit Score?
The federal government’s 2024 budget includes plans to allow rent payments to count toward credit scores. Apps like Chexy let you pay rent with a credit card, potentially earning rewards, though fees apply (1.75% for Canadian cards, 2.5% for non-Canadian cards).
Can I Have More Than One Credit Score?
Yes, different financial institutions use their own algorithms to calculate credit scores, so your score may vary slightly between lenders.
How Do Consumer Proposals and Bankruptcy Affect My Credit Score?
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Bankruptcy: Stays on your report for 6–7 years (depending on the bureau) from the discharge date. A second bankruptcy remains for 14 years.
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Consumer Proposal: Stays on your report for up to 6 years, or 3 years after the last payment if paid off early.
Both options can help rebuild credit faster than continuing with unmanageable debt.
Final Thoughts
Understanding your credit is crucial for maintaining financial health. Regularly review your credit report, monitor your score, and address inaccuracies or issues promptly. If you’re struggling with debt, consider consulting a Licensed Insolvency Trustee (LIT) for personalized advice and solutions. By taking control of your credit, you can build a stronger financial future.
