Understanding Your Credit Report and Credit Score
Understanding your credit report and credit score can be overwhelming. However, Top Gear Loans can help with not only understanding your credit; but giving you the tools to succeed as well.
We are a Canadian Company, so this information is only applicable if you live in Canada. We have attached a PDF below to help you with exactly that. This document (Sourced from the Government of Canada) may help you in your pursuit of improving your credit.
Please, don’t hesitate to reach out to us if you have questions or begin your application process today if you are interested!
Click here to view the PDF
For other useful resources, please check out the official Government of Canada website.
Understanding Your Credit (Overview)
Building a good credit history is important for your financial health.
Along with millions of other Canadians, you have a credit history that is kept on file by companies called credit reporting agencies. They track how you use credit products, such as credit cards and loans, and pay your bills.
This information is used to create your credit report and credit score. These are some of the main tools lenders use when they decide whether they will lend you money and how much they will charge you to borrow it. Employers and landlords may also use credit reports to get a sense of your reliability.
You have the right to see your own credit report. And there are ways you can get it for free.
Knowing what is in your report is important. If you have a poor credit history, it could be harder for you to get a credit card or a loan. You could have to pay more to borrow money. It could even affect your ability to rent housing or get hired for a job.
You can also use your credit report to check for signs of identity theft.
This guide can help you:
- understand your credit report and score
- improve your credit score
- correct errors in your credit report
- order your credit report and score.
CREDIT REPORT AND SCORE BASICS
What is a credit report?
Your credit report is a summary of your credit history. If you have ever used a credit card, taken out a personal loan, or used a “buy now, pay later” offer, you have a credit history.
Your credit report is created when you borrow money or apply for credit for the first time. Lenders send information about your accounts to the credit reporting agencies. Your credit report also includes personal information that is available in public records, such as a bankruptcy.
Your credit report contains factual information about your credit cards and loans, such as:
- when you opened your account
- how much you owe
- whether you make your payments on time
- whether you miss payments
- whether you go over your credit limit
Mobile phone and Internet accounts may be reported, even though they are not credit accounts.
Chequing and savings accounts that have been closed “for cause,” due to money owing or fraud committed by the account holder, can also be included.
What is a credit score?
A credit score is a three-digit number that is calculated using a mathematical formula based on the information in your credit report. You get points for actions that demonstrate to lenders that you can use credit responsibly. You lose points for things that show you have difficulty managing credit. To f ind out what counts toward your credit score, see page 16.
In Canada, credit scores range from 300 to 900 points. The best score is 900 points.
Lenders and credit reporting agencies produce credit scores under different brand names, such as Beacon, Empirica and FICO®.
Your score will change over time as your credit report is updated.
Businesses use your credit report and score to see how risky it would be for them to lend you money. It is up to each lender to decide on the lowest score you can have and still borrow money from them. Lenders may also use your score to set your interest rate and credit limit. If you have a high credit score, you may be able to get a lower interest rate on loans, which can save you a lot of money over time.
While they are very important, credit scores are usually not the only thing a lender will look at. Often, they will also consider other factors, such as your income, job or any assets you own.
Why might the credit score I receive be different from one a lender is using?
A credit score you order for yourself may not be the same as a score produced for a lender.
This can happen even if they are created at the same time using the same information in your credit report because there are different types of credit scores that are designed to meet the needs of lenders.
A lender may put more weight on certain information depending on the reason it is calculating your score. For example, it may want to assess your risk of becoming bankrupt or determine whether you qualify for a mortgage.
Your own credit score should still be in the same range as a score created for a lender.
Take credit for your actions!
Do you have a strong credit score? Use this to your advantage when you negotiate for a loan. Point out that you represent a lower risk to the lender and ask for a lower interest rate or better terms.
Please check out the rest of the document on Understanding your credit by clicking here.