What Is A Credit Report And Why Is It Important?

What is a credit report? If you know, then you may be thinking why you should bother with a credit report when you know your credit score. That’s all you need, right? Well, you couldn’t be more wrong! If you’ve ever had a credit card, loan, or mortgage, you most likely have a credit report in your name. Your credit report is a document that tells the story of your financial life.

Let’s dive into what a credit report is, why you should check it regularly, and why it’s super important to your financial well-being.

What is a credit report?

Put simply, a credit report is a record of your credit activity and credit history.

It contains a record of your history of making payments on time (or not), how long you’ve been using credit, your credit utilization rate, how much debt you have, whether you’ve ever filed for bankruptcy, and how many times you’ve applied for credit products in the last few years.

What’s on your report and how does it get there?

If you’ve ever had a loan, credit card, mortgage, car payment or filed for bankruptcy it’s all on your report.

There are four types of information on your credit report:

1. Personal information. Your credit report includes your personal information, such as:

   • Your full name

   • Your address history (both current and previous addresses)

   • Your date of birth

   • Your SIN (social insurance number)

   • Your telephone number

   • Your employment status

2. Credit accounts. Under the “Trades and Accounts” section, you’ll see a list of all the credit lines you’ve held in your name. Each credit account will show:

   • The type of account (revolving, instalment, open or mortgage)

   • The name of the lender

   • The credit limit or loan amount

   • The account balance

   • Your repayment history (whether or not you’ve made all your payments on time)

   • The date the credit account was opened (and closed, if applicable)

3. Inquiry information. Under the “Inquiries” section, you’ll find a list of any applications you’ve made for credit products in the previous few years, whether the applications were approved or not. Every time you apply for a credit product, the financial institution will run a “hard inquiry” on your credit report so that they can review it and use the information to decide whether or not they want to approve your application. This happens when you:

   • Apply for a credit card

   • Request a credit limit/line of credit increase

   • Apply for a loan

   • Apply for a mortgage

   • Apply to rent a property

   • Apply for a job (particularly in the financial services industry)

4. Public records and collections information. This section is where you’ll find court records such as bankruptcies, tax liens, consumer proposals, credit counseling and judgements, as well as any past due accounts turned over to collections agencies.

What information is NOT included in your credit report?

Your credit report contains a lot of information about you, to help potential lenders make decisions about whether or not they want to extend credit to you. That being said, there are some pieces of personal information that are not included on your credit report:

• Your income/salary. Your salary is not included in your credit report, although some banks and credit card companies may ask for it as part of their application process for certain credit products.

• Medical information. Information related to your health is private and is unrelated to your creditworthiness.

• Outdated information. Most data only remains on your credit report for up to 6-7 years, or 10 years in some cases.

How long does information stay on your credit report?

Different types of information stay on your credit report for different durations:

• Credit Inquiries. Most hard credit inquiries stay on your credit report for three years.

• Accounts. Your different credit accounts (like credit cards, car loans and mortgages) will stay on your credit report six years from the date of last activity. 

• Late Payments. Late payments can remain on your credit report for up to six years from the date the late payment was reported.

• Collections. If you have a late payment and don’t pay the past-due balance, the account could eventually be assigned to a debt collection agency, whose job it is to try and recover the money you owe. Your credit report will show any credit accounts that have been sent to collections, whether the balance(s) have been paid or unpaid. A collections item will stay on your credit report for six years from the date of your last payment, whether the balance has been fully paid or not.

• Judgments. Leaving an account unpaid for a long time could eventually result in a creditor or debt collector taking you to court for not making your payment. A judgment is a formal decision made by a court following a lawsuit. Judgments will stay on your Equifax credit report six years from the date filed.

• Consumer Debt Counselling. This is a personalized counseling service aimed to provide guidance and support if you’re in over your head. The goal of credit counseling is to avoid bankruptcy. This item will stay on your credit report three years from the date it was settled (or satisfied). If unsettled, it will stay on your credit report six years from the date filed.

• Consumer Proposals. A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). The LIT will work with you to develop a “proposal” to identify a percentage that you’re able to pay creditors. A consumer proposal will stay on your credit report for three years from the date it was settled (or satisfied). If unsettled, it will stay on your credit report for six years from the date filed.

• Bankruptcy. A bankruptcy will stay on your credit report six years from the date of discharge. If you were not discharged, a bankruptcy will stay on your credit report for seven years from the date filed. 

• Foreclosure. A foreclosure is when the bank takes possession of a mortgaged property if you haven’t been able to keep up your mortgage payments. This also shows on your credit report for six years from the date it was filed. 

How do I read my credit report?

Reviewing your credit report regularly can help you understand what lenders think of you when you apply for credit. You can access your full Equifax credit report for free through Borrowell. We’ll update your report weekly, so you can keep on top of any changes.

Why you should check your report regularly

You should monitor your credit report at least once a month to make sure that everything is accurate. Items you should check include: your credit utilization, if you’ve closed a loan or credit card to make sure it’s closed, and to make sure that there are no misreported missed or late payments. Yes, this can happen!

You also want to be checking your credit report for signs of fraud or identity theft. Once a month, take a look through the accounts and inquiries listed on your credit report to ensure that there’s nothing there that you don’t recognize. If you do spot anything suspicious, your first step should be contacting the financial institution that the unfamiliar account or inquiry relates to. The fraud department will be able to investigate further.

Can someone download my credit report without my permission?

To protect the personal information held on your credit report, there are laws and rules around who can access it. In most cases, you must provide consent before someone can run a credit check on your report. However, there are exceptions in some provinces. 

In Nova Scotia, Prince Edward Island and Saskatchewan, your explicit written consent is not required for a lender to check your credit report. Instead, the financial institution only needs to inform you that they are checking your credit report. 

In some provinces, the government or the police can also access your credit report without your consent. For instance, in British Columbia, your credit report may be released to the police or the courts by court order. 

How to get your credit report

Credit reports are easy to obtain. You can use Borrowell’s free credit monitoring service to receive your Equifax credit report and credit score updates weekly.

Why your credit report is important

Your credit report tells potential creditors, lenders, employers and landlords how financially stable you are and how good you are at paying your bills on time. It helps them to make a decision about you. Like whether a landlord should rent to you, or if a car dealer should finance a car with you, or if the bank should approve you for a credit card so you can take a trip, or buy something you need in an emergency.

Your credit report and score can affect so many areas of your life, so it’s important that the financial information is accurate and positive.

Get your free credit score and free credit report from Borrowell! It only takes 3 minutes.

How to dispute incorrect information on your credit report?

If errors are present on your credit report, it can have a damaging effect on your credit score. This is because credit scores are determined by the data that appears on your credit report, so if there are mistakes, your score will suffer.

If you identify incorrect information on your credit report, you’ll need to file a dispute with Canada’s credit bureaus: Equifax and TransUnion. We’ve written a guide to help you get mistakes corrected and/or removed from your credit report.

The bottom line

A credit report is an important tool for understanding and managing your financial health. With a clear understanding of your credit history, you can make more informed decisions about how to use credit responsibly. It's important to regularly review your credit report to ensure accuracy and to identify any potential issues. By managing your credit report, you can take proactive steps to improve and protect your credit score.