Basics of Credit Scores, Reports & Ratings
The most popular thing to talk about when it comes to credit ratings is the credit score. Like a test score, it can feel like a nice, simple number that seemingly tells you everything you need to know. However, these scores are actually only one part of a credit rating. To really understand how your credit works, we need to back up and start from the beginning.
There are two official credit reporting agencies in Canada: Equifax and TransUnion. Also called the credit bureaus, these are the two organizations you must know about to understand your credit. When you apply for a credit card, take out a loan, or do any other credit-related activities, the lender you’re dealing with will report it to Equifax and/or TransUnion. The credit bureaus then record the information they are given on your credit report.
This report is a summary of how well you’ve held up to your promise of paying back the money you owe. It contains the history of every credit account you’ve had for the past 6-7 years, which can include credit cards, loans, lines of credit, deferred payment plans, and services like cellphone and internet plans. Your credit report also keeps track of those who have inquired about your credit, and there’s a public records section. That section shows if you have any unpaid debts that have gone to collections or if you have any judgments against you. Each of your credit accounts has an individual rating that shows if you’re up to date or late with your payments. Your credit scores are then based on all the information contained in your credit reports.