Whether you’re trying to establish credit for the first time or trying to re-establish credit after experiencing financial difficulties, the first step is understanding your credit report.
Your credit report is a summary of your credit history. It is created when you borrow money or apply for credit for the first time. Lenders send information about your accounts to the credit bureaus creating a history of repayment that other creditors use to gauge your creditworthiness.
Your credit rating is an alphabetical and numerical code which provides a history of how you have paid each individual creditor. These codes have two parts:
For example, if you have a credit card that you paid on time, it will be reported as an “R1”.
Your credit score is a three-digit number which helps lenders determine if you are a good financial risk. Your credit score is calculated using a formula that produces a number between 300 and 900. This higher your score the better credit risk you are to the lender. There are several factors which may impact your credit score. These factors can include:
Each lender determines their own minimum score necessary for them to lend you money.
There are two main credit bureaus in Canada:
You should get a copy of your credit report at least annually to ensure that the report is accurate. Yes, mistakes can occur on your credit report which can lead to problems being approved for credit. You can order your credit report by contacting the credit bureaus using the websites noted above. Looking at your own credit report will not have a negative impact on your credit score.
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