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What Is A Credit Report And Why Is It Important?

Michelle Summerfield

Oct 01, 2018 5 min read

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’s the home for all your payment history, how much debt you have, how much credit you use, whether you’ve ever filed for bankruptcy, missed a payment, and who has made an inquiry into your credit.

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 three types of information on your credit report:

1. Credit accounts Your credit report lists any type of credit you’ve ever had. In fact, your credit report can be pages and pages long depending on how long you’ve used credit products and how many you’ve had. Each credit account listed shows the lender name, the type of account (car loan, credit card, mortgage, etc.), your credit limit or loan amount, the balance and if you’re in good standing or not on your payments.

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

2. Inquiry information This includes information on companies that have requested a copy of your credit report. There are two types of inquiries called “soft” and “hard” inquiries.

Soft inquiries don’t impact your credit score and include requests you make on your history and other items like pre-approved offers for credit cards, or creditors that want to do a review on your accounts. These do not affect your credit score and are only visible to you.

Hard inquiries are when a potential lender reviews your credit history because you have applied for car financing, credit cards, loans, a mortgage or other form of debt product. These types of inquiries stay on your report for 36 months and do have an effect on your credit score.

3. Public record and collections information This is where court records such as bankruptcies and past due accounts turned over to collections agencies live.

Why you should check your report regularly

You should monitor your credit report each 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 no one has taken any credit products or mortgages out in your name. Yes, this can happen!

When I got divorced, the first thing I did was check my credit report. Because I didn’t change my last name back right away, I wanted to make sure they hadn’t mixed up any of my information with my ex.

Let me say, it was a very good idea I ordered my credit report and checked it. The first thing I noticed? They had me living at my ex’s new address. Not exactly what you want to see when you’re newly divorced but I’m super glad I checked. Now, you might be thinking, big deal, it’s just your address. Well, it is a big deal. I tried to apply for a credit product and because the addresses didn’t match, I was declined.

So it’s always a good idea to check your credit report after any major life events. For example, if you recently got married and want to buy your first home with your new partner, you should check your credit reports. When you apply for a joint credit account, both of your credit histories will be considered and could impact your approval chances.

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, or you can contact one of Canada’s two credit bureaus, Equifax or TransUnion, to obtain your report by mail for free once a year. 

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 information is accurate and positive.

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

About The Author

Michelle Summerfield is a professional blogger and the creative director of The Classy Simple Life, a lifestyle design blog aimed at the 40+ woman. The blog started in 2012 and developed into a professional blog in 2017. In addition to documenting her journey to a simpler life, she covers topics such as money management, health + wellness, beauty, solo travel and thoughts on being a creative entrepreneur. Her work has been featured in The Globe and Mail, Toronto Life, and the CBC. To learn more about Michelle, visit her website here.

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