What is a credit report?
“Your credit report provides a summary of your credit history in particular,” explains Pascale Arès, Product Manager, Credit Card, at National Bank credit cards. “Among other things, it will include where you’ve worked and lived in the last few years. Your report also includes information on loans you’ve taken out and your payment habits, including the date on which you opened an account, its credit limit, the balance on your account, and its payment terms, for example.”
Your report contains a credit score, which is also called a credit rating. This is a 3-digit score that falls somewhere between 300 and 900. “This score is updated frequently and regularly,” Arès states. “Many elements influence this score. In particular, it depends on how you use your credit and your diligence in paying your bills.”
Why is it important to have a good credit report?
When you ask for a loan, your score is a determining factor in the loaner’s decision. The higher your score, the less risky it is to lend you money. Other elements may also be taken into account, such as your income, your current job and your assets.
Whether you’re thinking of buying property, taking out a car loan or starting a business, a good credit report will help you achieve your goals. “We explain to students who are thinking about opening a dental clinic or an engineering firm that, to get a bank loan, their credit report is their main ally. It demonstrates their ability to manage the credit they already have,” says Sylvie Coulombe, director, newcomer partnerships at the National Bank.
“It’s one of the basic elements of the Canadian banking system. It allows lenders to determine the level of risk that a loan represents. It’s important to realize that credit doesn’t work the same way everywhere in the world. That’s why it’s crucial for newcomers to this country to take the time to understand the particularities of our system,” adds Sylvie Coulombe.
Understanding how personal credit reports work helps you maintain a good credit score, and lenders will be more inclined to grant you a loan.
How do you build a credit report?
Manage your finances more confidently in Canada with our practical guide
Learn more about the financial system and how to make a personal budget, manage a bank account, your savings, and your investments.
Your credit report is created the moment your first request for credit is accepted. While some financial solutions are offered to people who don’t have any previous credit, it’s easier to get a loan when you have a credit report and credit history.
For newcomers and young adults, the easiest way to create a credit report is to sign up for a credit card issued by a financial institution or to take out a line of credit.
“We advise newcomers and students to start using a credit card as soon as possible to build their credit report. More importantly, we recommend they use their card the right way, paying it off in part or in full by the due date,” says Sylvie Coulombe.
If your credit score was impacted by poor actions in the past, you can still take the initiative to improve your score. “There are ways to rectify the situation by sitting down with an advisor to understand the behaviours that have affected your credit score. You can then make a plan to improve it and move forward with your goals as soon as possible.”
How do you get a copy of your credit report?
Upon request, you can obtain your report from a consumer credit reporting agency, also called a credit bureau. You can get a free credit report by contacting a credit bureau by phone or by email.
If you submit a credit request to the bank, your advisor will have to consult your credit report. “They will then be able to show you their screen and help you interpret your credit score,” explains Sylvie Coulombe.
“Because credit reports also include personal information, they’re highly confidential.”
How do you know if your credit score will allow you to buy a home?
An expert can analyze your credit report and give you a mortgage pre-approval. That way, before you even start to look, you’ll be aware of your situation and know which properties you can afford.
If you’re a newcomer who wants to buy property but don’t yet have a presence in a credit bureau’s files, know that banks have other ways of checking your credit history. In fact, your payment history can be verified through confirmations of your rent payment or of payment of public-record bills like your electricity or cell phone bill.
Whether you want to build your credit report, maintain your credit score or improve it, speaking with your advisor is key. They will show you how to have a positive impact on your credit report and help you achieve your goals.
How do you prevent credit fraud?
When you apply for a credit card at a bank, for example, they may ask you for the name of your employer in 2017 or your address in 2015 to verify your identity and make sure they’re not dealing with an identity thief.
Consider checking your credit report now and then to make sure it reflects reality. The Financial Consumer Agency of Canada suggests that you consult it at least once a year.