Your credit report – You apply for a mortgage and are denied. You apply for a car loan and it falls through. Perhaps you should request a copy of your credit report.
Credit reports are strategic for financial and lending institutions to measure a person’s credit responsibility and credit history. With good credit, the world can be at your hands. However, with a bad credit rating, you can be haunted by financial denials for up to seven years. Bad credit can hamper any hopes you may have of achieving financial success. Many people know very little about their credit report and ratings. We are all able to access a free copy of our credit report yearly. The first step though is to understand what your credit report is saying about you.
There are two major credit-reporting agencies in Canada: Equifax Canada Inc. and Trans Union of Canada. These agencies are linked to lending and financial institutions throughout Canada and are regularly updated. When you go to a financial or lending institution, one of the first things they do is access and assess your credit rating. The majority of lending institutions check credit reports through Equifax. To understand the language of your credit report, let’s take a look at some key terms.
- Account Status – Shows the current status of your account and may show delinquencies that were reported during the previous seven years.
- Balance Amount – Amount due to the creditor at the time account information was last reported.
- Credit File – A record of an individual’s credit payment history as reported at a credit reporting agency.
- Credit Report – A compilation of credit information presented in an easy to read format. Credit Reporting Agency -Also known as a Credit Bureau. An organization that compiles information from financial institutions, lending companies, and courts to create an individual’s file.
- Credit Score – A score based on variables in your credit file that ranks your credit worthiness compared to the rest of the population.
- Creditor – A person or business from whom you borrow or owe money.
- Date on File – Date your credit file was started.
- Date Open – Date account was opened.
- Date Paid – Date account was satisfied.
- Date Reported – The last date in which the file was updated by the credit reporting agency with credit information.
- Filing Date – Date item was filed with the courts.
- High/Limit – The highest balance since the account was opened or the limit on the account.
- Inquiry Date – Date your credit file was requested.
- Last Activity Date – Date of last activity on the account.
- Monthly Payments – Average monthly payment reported to the credit reporting agency.
- Original Creditor – Shows the original creditor that turned the account over to the collections agency.
- Ownership – Designation by a lender of an individual responsible for payment of account.
- Past Due Amount – Amount currently past due.
- Payment Pattern Grid – Shows the amount of time the account was reported past due: 30, 60 or 90 days.
Type of Account:
- Revolving – an account where a balance is carried over from month to month.
- Installment – An account with a fixed payment for the term of the loan.
- Mortgage – A fixed payment account involving ownership or property.
- Open – An account where the balance must be paid in full at the end on 30 days.
Once you have ordered and received your free credit report from Equifax, Trans Union or both, then it is time to review your score. Make sure your names, address, Social Insurance Number, and date of birth are all correct and up to date. Secondly, ensure all accounts listed are yours. Ensure the balances, limits and accounts are correctly listed.
What is your credit score?
Your credit score can range from 399 (lowest) to 862 (highest). If your score is between 399 and 550, it is weak and you may not be approved for financial loans or mortgages. The mid point would be 750 and the best credit score would be closer to 862. The higher the score, the better your chances will be for financial approvals. To challenge anything that seems out of sorts on your credit report, contact the reporting credit agency immediately.
To find out how you can improve your credit rating, you can speak to a qualified credit education specialist, your bank loans officer or you can apply for a credit information booklet from one of the credit reporting agencies. The most important objectives are to know what’s in your credit report, report any inaccuracies, check your score quarterly and do your very best to improve your score. Make all your payments on time, be faithful to gratify your loans and don’t apply for credit you know you cannot financially pay back. Ignorance may be bliss but in this case, education is the key to your financial success.
Text by Lesley A. Baker