Credit report basics: how to check it, why it matters


You'll often hear from financial experts that you should check your credit report regularly. But what is your credit report, how do you check it and, most importantly, do you even have one?

First things first: if you've ever borrowed money from a financial institution -- for instance, if you have a credit card, line of credit or a student loan -- you have a credit report. The report details all that you owe and how consistent you are (or not) at paying your bills.

According to statistics compiled by, as of 2015, more than half of Canadians (56 per cent) had never checked their credit report and score before. Only 14 per cent said they check it at least once per year.

It may seem easier to hide from your credit report, because it seems complicated, and maybe you're afraid of what you might find on it. However, your credit report can make a big difference in your life, so it's important to find out what yours is saying about you.

What's in a credit report?
There are two major credit reporting agencies in Canada, Equifax and TransUnion, and you have a report with each.

Your report shows all your open accounts, and all closed accounts from the previous six years. After that, closed accounts fall off your report; this period may vary by province. This includes not only loans and credit cards from your financial instruction, but store-branded credit cards, vehicle financing and any other type of loan.

Each line item on your credit report is given a credit rating. This is a letter/number combination in which the letter denotes the type of loan it is (revolving, installment or open) and the number indicates the status of the account (1 is the best rating and 9 is the worst).

Your report also shows how many recent credit inquiries you have made. Too many in a short period is a red flag to lenders that you are desperate for credit.

Your credit score
The contents of your credit report are used to calculate your credit score. Lenders, employers, landlords and anyone else looking at your credit is doing so to determine their risk if they lend to you, hire you or rent to you. Typically, they are looking for good repayment history, a good balance of available credit compared to used credit and a mix of different credit products, among other factors.

Your credit score ranges from 300 to 900. Different bureaus will have slightly different scores for you, but regardless, your goal should be to have the highest score possible. A score in the 600s to the 700s is considered good. If you have all "1" ratings on your accounts, your score should be in good shape.

"Our credit score is our gateway to stuff in our society today, from jobs, to cellphone companies," says Helen McAuley, credit counsellor at Family Service Thames Valley. "When we have better credit scores we have better purchasing power."

Correcting false information on your credit report
By checking your report at least once a year, you know what potential lenders (or employers, or landlords) are seeing. However, doing this can also help you  spot inaccuracies, which can happen more often than you think.

"What's important ... is that your information is correct," McAuley says. "Your name, your birth date and your address. You [also] want to know that files are closed properly."

"You have the right to dispute any information on your credit report that you believe is wrong," says Emma Osgoode, a communications officer for the marketing and communications branch at the Financial Consumer Agency of Canada (FCAC).

Often, McAuley says, it's easier to go back to the original creditor to ask to have mistakes corrected. Fixing inaccuracies can be time consuming, but it's worth the effort.

"It's worthwhile correcting because it could compromise your credit score, which could compromise that mortgage or other loan you're trying to get," she says.

Spotting false information could indicate something more sinister than human error: Identity theft, Osgoode says.

Someone may be opening credit cards, mortgages or other loans under your name, and if you don't check your credit report, you could go months -- or even years -- without knowing.

How often should you check it, and from which bureau?
The FCAC, along with most experts, suggests checking your report from each of Canada's two reporting agencies annually. You are granted one free report per year, from each bureau.

The FCAC also suggests that you, "Consider requesting your report from one bureau, then wait six months before you order from the other bureau. By spacing out your requests, you may be able to detect problems sooner."

Reports can differ depending on the reporting practices of your lenders.

"Businesses are members of either TransUnion or Equifax, and they're paying to be a member, so they may choose to only work with one," McAuley says. Because the agencies are working with different information, that's why you may notice a difference between your scores.

Osgoode says your credit score also can differ between the two reporting agencies because of how they weigh the factors in your credit history. For instance, one bureau may weigh your repayment history at 35 per cent of your score, while the other only uses it to account for 30 per cent.

"Credit bureaus don't share the actual formulas they use to calculate credit scores," Osgoode says. However, the general factors are about the same, and the rule is always to pay on time, every time, and to not borrow too much at once.

Methods of pulling your credit report
There are several different ways to get your credit report:

By mail. You can print and mail a form to receive a free credit report from both Equifax and TransUnion. Be sure to follow all the directions for the required identification you'll need to send in with the form.

By phone. You can also call in to request a copy of your credit report and have your consumer disclosure mailed to you. Equifax 1-800-465-7166; TransUnion 1-800-663-9980.

It's important to note that when you order only a free credit disclosure by mail you won't receive your credit score. You can order your credit score online for a separate fee. There may also be other ways to receive just your credit score for free, through certain websites or even some credit card issuers.

Online. The fastest way to get your report is online, but you'll have to pay for it. Equifax's website allows you to verify your information and order a report, or a report and score together,  for $15.50 or $23.95, respectively.

TransUnion's website makes a credit report and score available as part of its subscription-based credit monitoring service, which costs $16.95 per month.

See related: Application denied: 6 reasons for credit rejection, 7 surprising facts about your credit score, How many credit cards is too many?

Published April 5, 2017

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