Loan Articles

The credit history of millions of Canadians is recorded and kept in the major credit bureaus in the country (TransUnion Canada, Equifax). Credit histories are maintained in files known as credit reports. These are used by financial institutions to decide whether applicants should be extended financing.

A credit file is opened when a borrower first applies for credit or borrows money. Financial institutions that issue credit cards, mortgages, car loans, personal loans or lend money send information to the reporting agencies regarding the borrower’s financial transactions. Companies that send such factual information include credit unions, finance companies, retailers, and banks.

Borrowers’ credit scores are generally a judgment or sign of their financial health. A scale from 300 to 900 is used by TransUnion and Equifax to measure it. Good scores are the higher scores meaning that lending institutions take less risk with borrowers who have a high credit score. Hence, they are willing to offer attractive interest rates and agreeable terms and conditions. Some reporting agencies rate credit history using a scale of 1 to 9. Those who have a rating 9 have made a consumer proposal or never pay their bills. Persons with a rating 1 always pay their bills on time. Letters appear together with numbers and refer to the type of financing the borrower is using. ‘I’ stands for installment loans, which are loans to be repaid on a regular basis and in fixed amounts over a specified
period of time. The letter ‘R’ stands for revolving credit whereby the borrower is making regular payments. The amount varies based on the balance in the account, and money can be borrowed up to a certain credit limit. Credit cards are one type of revolving credit. Finally, the letter ‘O’ shows that the borrower has a line of credit or a a href="">student loan, where the money is due at the end of an agreed upon period.

Favorable information recorded on one’s credit report stays on it indefinitely. Regarding negative information and the removal of such, the rules depend on the laws of one’s province of residence. Negative information is removed 6 to 10 years from the date a judgment is filed while this period is between 6 and 7 years for bankruptcies. Credit reports contain personal information as well, which is reported by creditors. Personal information includes the borrower’s name, their former and current address, employer, and more. The information kept in credit reports also comes from corrections submitted to the credit bureaus as well as from public records. What happens with inaccurate information? Credit-reporting agencies do not change the information kept in the report unless this information is incomplete or inaccurate. In fact, many people report inaccurate information on their credit report, and it is a good idea to check for inaccuracies regularly. If a borrower disputes some item on the report, the credit agencies will ask their source to confirm the information. The borrower can write a statement to be added to his file if this does not resolve the question. Note that corrections are not to be made by email.

Finally, a credit report can be obtained by mail free-of-charge, but the main disadvantage is that it will not show one’s credit score. Those who request their report online have the option to get their credit score as well.

The two major Credit Reporting Agencies in Canada are Equifax Canada Inc. and Trans Union of Canada.