When applying for any type of credit, the lender will request a copy of your credit bureau report. This gives them a picture of how you pay your outstanding debts. The two major credit reporting agencies in Canada are Equifax Canada and Trans Union of Canada. Both these agencies obtain their information directly from the institutions that you owe.
As you can probably guess, Equifax and Trans Union deal with millions of pieces of information on a monthly basis and sometimes mistakes can happen, which can result in false credit scores.
Last year a CBC News report found that in most cases, consumers were not aware of the negative information in their reports. With so much emphasis on credit scores, it’s vital that consumers become more aware of what’s being reported in their individual files. It’s equally important to know what impacts your credit score.
Here are the factors that contribute to your credit score:
• Payment history –accounts for about 35% of your credit score. Carrying balances from month-to-month and missing payments (number of missed payments and how long ago the payment was missed) impact your score. Tip: Pay at least the minimum payment by the due date.
• How much you owe –looks at the total outstanding balance in relationship to the total of all your credit limits and accounts for 30% of your credit score. Tip: Pay down your debt to at least 30% of your global loan limits.
• Your account history – the length of time you’ve had credit accounts for 15% of your score. The longer you’ve had credit, the higher the value.
• Recent inquiries – accounts for 10% of your score. Too many inquiries sends a message that you need money, which negatively impacts your score. Ordering your own credit report has no impact.
• Type of credit –accounts for 10% of your credit score. Credit is either revolving, as with credit cards, or installment, as with car loans. Higher scores are given to people with a blend of credit from various sources.
• Collection or bankruptcy –negatively impacts your score. Once discharged from a bankruptcy or a consumer proposal, you can rebuild your credit and you may find you are in better shape than before you filed. Contact a licensed Trustee in bankruptcy for more information.
Consumers can request their credit report information via mail or online. Credit reports via mail are free but do not include your credit score. Credit reports and scores are available online for a small fee. For more information visit Equifax at www.equifax.ca and TransUnion at www.transunion.ca .