Understanding Credit: Part 1, Your Credit Report
Credit is something that we all think we understand, but few of us actually have a grasp on – until it’s too late. Yes, credit is that invisible little thing that allows you to make purchases and use money that you haven’t yet earned – provided that once you do have the money, you’ll pay off everything that you’ve spent. Such a simple concept, but yet something that trips so many people up. That’s why in our latest mini-series, we’re going to be taking a look at credit, what it is, what affects it, and how you can make yours better. Today, we start by taking a most basic look at your credit report.
What is a credit report?
A credit report is a statement containing all the information about your past credit history. That history is made up of things such as loans you’ve applied for, credit cards you’ve used, and any other loan and payment information you’ve accumulated in the past. Even things such as unpaid utility bills will show up on your report – this is a service that you didn’t pay for at the time, but relied on credit to get you gas or heat until the bill came in (and hopefully, you paid it on time.) Essentially, your credit report is a snapshot of your entire credit history, any money that you’ve borrowed, and any payments that you have or have not made.
What other information is on your credit report?
In addition to just loans you’ve taken out and outstanding balances on those loans, your credit report will also contain some other personal information about you. That includes personal information such as: your name, your current and previous addresses, SIN, telephone number, date of birth, and past and current employers.
Banking information such as NSF cheques may also appear on your credit report, as will any public information relating to your financial picture, such as bankruptcies, or secured loans.
Consumer statements can also appear on your credit report. These are any statements that you have submitted explaining a certain situation, such as why that credit card balance is still showing on your credit report.
Credit report inquiries will also show on your report. This shows how many people have asked to see a copy of your credit report including yourself, lenders, and any other authorized organizations.
Who has your credit report?
In Canada, there are two credit reporting agencies. One is TransUnion, and the other is Equifax. These agencies, also known as credit reporting bureaus, collect information from financial institutions and other creditors every time you borrow money, pay it back, or fail to make your repayments. Each time you apply for new credit, or for a new loan, the lender or creditor will check your credit report with these agencies. If the credit report is favourable, they will most likely lend you the money. If it’s not, they most likely won’t.
Who can see your credit report?
Your credit report is yours and yours alone and you can see it as many times as you would like. Both credit reporting agencies typically allow you one free copy each year (sent by snail mail.) If you want to see your report more than once a year, you’ll most likely have to pay a small handling fee in order to do so.
Other people can see your credit report, but you must give them express written permission to do so. These third parties obtaining a copy of your report would be organizations and lenders that you want to borrow money from, landlords that want to check your payment history, and other agencies requesting information about your debt or collection history. While you must give permission for anyone to obtain a copy of your report, this clause is usually written in very fine print on any credit or loan contract that you sign. If you don’t want someone to see your report, make sure you read that fine print and that you don’t sign the contract. You’ll keep your information safe, but it’s also important to know that you most likely won’t get the loan.
Credit reports can be confusing to a lot of people. With so many myths surrounding how many people can view it, what’s contained on it, and what’s not has left a slew of misinformation out there that has caused many people to wonder what’s the truth and what’s not. We hope that this brief overview of them has helped sort out any confusion you may have had, and that you enjoy the rest of our mini-series on understanding credit. Come back tomorrow when we take an in-depth look at credit scores, and what yours means!