You and Your Credit

Use Different Types of Credit

Your score may be lower if you only have one type of credit product, such as a credit card. It's better to have a mix of different types of credit, such as: a credit card, a car loan, a line of credit
A mix of credit products could improve your credit score, but make sure you can pay back any money you borrow. Otherwise, you could end up hurting your score by taking on too much debt.

How Long Information Stays On Your Credit Report

A credit bureau can only keep information about late payments on your credit report for a certain period of time.
The exact time varies by:
 - the type of information
 - the province or territory you live in
 - the credit bureau that created the report
Positive information
A credit bureau may keep positive information, like payments made on time, in your credit report for longer. Positive information will help your credit score.
Negative information
Generally, negative information stays on your credit report for 6 years. However, certain information may remain for a longer or shorter period of time. Negative information can hurt your credit score.
Negative information can include:
 - missed payments on a debt
 - bounced cheques
 - accounts that were sent to collections
 - Judgments
A judgment is a debt you owe through the courts due to a lawsuit. For example, if somebody sues you and you lose, then the debt may show up on your credit report.
Usually this information stays on your credit report for 6 years.
However, TransUnion keeps this information on file for 7 years in the following provinces:
New Brunswick
Newfoundland and Labrador
Ontario
Quebec
TransUnion keeps this information on file for 10 years in Prince Edward Island.
 - Consumer proposals
A consumer proposal is a legal agreement set up by a licensed insolvency trustee. The trustee creates a proposal for your creditors where they agree to let you pay off a percentage of your debt.
Equifax removes a consumer proposal from your credit report 3 years after you've paid off all of the debts included in the proposal.
TransUnion removes a consumer proposal from your credit report either:
3 years after you've paid off all of the debts included in the proposal, or
6 years after you sign the proposal (whichever is sooner)
 - Bankruptcy
Generally, both Equifax and TransUnion remove a bankruptcy from your credit report 6 years after the date you're discharged.
TransUnion removes a bankruptcy from your credit report 7 years after you're discharged in the following provinces:
New Brunswick
Newfoundland and Labrador
Ontario
Prince Edward Island
Quebec
If you declare bankruptcy more than once, then the bankruptcies will appear on your credit report for 14 years.

Credit Report and Score Basics

From the "Financial Consumer Agency of Canada"

Your Credit Report

Your credit report is a summary of your credit history.

Your credit report is created when you borrow money or apply for credit for the first time.

Lenders send information about your accounts to the credit bureaus, also known as credit reporting agencies.

Your Credit Score

Your credit score is a three-digit number that comes from the information in your credit report. It shows how well you manage credit and how risky it would be for a lender to lend you money.
Your credit score is calculated using a formula based on your credit report.

Note that:
You get points for actions that show you use credit responsibly
You lose points for things that show you have difficulty managing credit
Your credit score will change over time as your credit report is updated.

How a Credit Score is Calculated

It's not possible to know exactly how many points your score will go up or down based on the actions you take. Credit bureaus and lenders don't share the actual formulas they use to calculate credit scores.

Factors that may affect your credit score include:

1. how long you've had credit
2. if you carry a balance on your credit cards
3. if you regularly miss payments
4. the amount of your outstanding debts
5. being close to your credit limit
6. the number of times you try to get more credit
7. the types of credit you're using
8. if your debts have been sent to a collection agency
9. any record of insolvency or bankruptcy

Lenders set their own guidelines as to the minimum credit score you need for them to lend you money.
If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may not be the same as a score produced for a lender. This is because a lender may put more weight on certain information when calculating your credit score.

Who creates your Credit Report and Credit Score

There are two main credit bureaus in Canada:

Equifax and TransUnion

These are private companies that collect, store and share information about how you use credit.
Equifax or TransUnion only collect information from creditors about your financial experiences in Canada.
Some financial institutions may be willing to recognize a credit history outside Canada if you ask them. This may involve extra steps. For example, you may request a copy of your credit report in the other country and meet with your local branch officer.

Who Can See and Use Your Credit Report

Credit bureaus follow rules that define who can see your credit report and how they can use it.
Those allowed to see your credit report include: banks, credit unions and other financial institutions, credit card companies, car leasing companies, retailers, mobile phone companies, insurance companies, governments, employers, landlords.

These businesses or individuals use your credit report to help them make decisions about you.
These decisions could be to: lend you money, collect a debt, consider you for rental housing, consider you for a job, provide you with insurance, offer you a promotion, offer you a credit increase.
When a lender or other organization “checks your credit” or “pulls your report,” it's accessing your credit report at the credit bureau. This is usually recorded on your credit report as an inquiry.
If there are too many credit checks, or inquiries on your credit report, lenders may be concerned. It can seem like you're urgently seeking credit. Or, it can look like you're trying to live beyond your means.

Consent and Credit Checks

In general, you need to give permission, or your consent, for a business or individual to use your credit report.

In the following provinces a business or individual only needs to tell you that they are checking your credit report: Nova Scotia, Prince Edward Island, and Saskatchewan.

Other provinces require written consent to check your credit report. When you sign an application for credit, you allow the lender to access your credit report. Your consent generally lets the lender use your credit report when you first apply and anytime afterward while your account is open.
In many cases, your consent also lets the lender share information about you with the credit bureaus if your application is approved.
Some provincial laws allow government representatives to see parts of your credit report without your consent. This includes judges and police.
Contact your provincial and territorial consumer affairs office for information on laws related to credit reporting.

What's Included in Your Credit Report

Your credit report contains personal, financial and credit history information. In general, it takes 30 to 90 days for information to be updated on your credit report.
Personal information on your credit report
Your credit report may contain: your name, date of birth, current and previous addresses, current and previous telephone numbers, social insurance number, driver’s licence number, passport number, current and previous employers.

Financial Information on Your Credit Report

Your credit report may contain: non-sufficient funds payments, or bad cheques
chequing and savings accounts closed “for cause” due to money owing or fraud committed
credit you use including credit cards, retail or store cards, lines of credit and loans
bankruptcy or a court decision against you that relates to credit debts sent to collection agencies
inquiries from lenders and others who have requested your credit report in the past three years
registered items, such as a lien on a car that allows the lender to seize it if you don't make payments
remarks including consumer statements, fraud alerts and identity verification alerts
Your credit report contains factual information about your credit cards and loans, such as: when you opened your account, how much you owe, if you make your payments on time, if you miss payments, if your debt has been transferred to a collection agency, if you go over your credit limit
personal information that is available in public records, such as a bankruptcy, Chequing and savings accounts that have been closed “for cause,” due to money owing or fraud committed by the account holder, can also be included.

Other Accounts Included on a Credit Report

Mobile phone and Internet accounts may be reported on a credit report, even though they aren't credit accounts. Your mortgage information and your history of mortgage payments may also appear in your credit report. The credit bureaus will decide if they will count this information when determining your credit score. A home equity line of credit that is added to your mortgage will be treated as part of your mortgage for your credit report. If your home equity line of credit is a separate account from your mortgage, it will be reported separately.

Why Your Credit History Matters

It can affect your finances
Financial institutions look at your credit report and credit score to decide if they will lend you money. They also use them to determine how much interest they will charge you to borrow money. If you have no credit history or a poor credit history, it could be harder for you to get a credit card, loan or mortgage. It could even affect your ability to rent a house or apartment or get hired for a job. If you have good credit history, you may be able to get a lower interest rate on loans. This can save you a lot of money over time.

It can show signs of identity theft
You can also use your credit report to check for signs of identity theft. This is something you should do at least once a year for both credit bureaus. Look to make sure someone has not tried to open credit cards or other loans in your name.

Improving Your Credit Score

Monitor your payment history
Your payment history is the most important factor for your credit score.
To improve your payment history: always make your payments on time
make at least the minimum payment if you can’t pay the full amount that you owe
contact the lender right away if you think you'll have trouble paying a bill
don't skip a payment even if a bill is in dispute
Some payments, such as student loans, won't be counted for your credit score. However, if you miss payments and your loan is sent to a collection agency, this will be included in your credit report. It will damage your credit score.

Use Credit Wisely

Don't go over your credit limit. Use only a percentage of your available credit. Try to use less than 35% of your available credit. If you use a lot of your available credit, lenders see you as a greater risk. This is the case even if you pay your balance in full by the due date. To figure out how to best use your available credit, add up the credit limits for all your credit products.
This includes: credit cards, lines of credit, and loans.
For example, if you have a credit card with a limit of $5,000 and a line of credit with a limit of $10,000, your available credit is $15,000. Try not to borrow more than $5,250 at any time. This is 35% of $15,000.

Increase Length of Credit History

The longer you have a credit account open and in use, the better it is for your score. Your credit score may be lower if you have credit accounts that are relatively new.
If you transfer an older account to a new account, the new account will be considered new credit.
For example, some credit cards offer you a low introductory interest rate on your current balance if you transfer it to a new product. The new account you transfer the balance to would be considered new credit.
Consider keeping an older account open even if you don't need it. Use it from time to time to keep it active. Make sure there is no fee if the account is open but you don't use it. Check your credit agreement to find out if there is a fee.

Limit Your Number of Credit Applications or Credit Checks

It's normal and expected to seek credit every so often. When lenders and others ask a credit bureau for your credit report, it's recorded as an inquiry.
If there are too many credit checks on your report, lenders may think you're: urgently trying to get credit, trying to live beyond your means.

“Hard Hards” versus “Soft Hits”

Hard hits” are credit checks that appear on your credit report and count toward your credit score. Anyone who views your credit report will see these inquiries.
Examples of hard hits include: an application for a credit card, some rental applications
some employment applications.

Soft hits” are credit checks that appear on your credit report but only you can see them. These credit checks don't affect your credit score in any way.
Examples of soft hits include: requesting your own credit report, businesses asking for your credit report to update their records about an existing account you have with them.

How to Control the Number of Credit Checks

To control the number of credit checks on your report: limit the number of times you apply for credit, get your quotes from different lenders within a two-week period when shopping around for a car or a mortgage so that they are combined and treated as a single inquiry for your credit score, and apply for credit only when you really need it.

Use Different Types of Credit

Your score may be lower if you only have one type of credit product, such as a credit card. It's better to have a mix of different types of credit, such as: a credit card, a car loan, a line of credit
A mix of credit products could improve your credit score, but make sure you can pay back any money you borrow. Otherwise, you could end up hurting your score by taking on too much debt.

How Long Information Stays On Your Credit Report

A credit bureau can only keep information about late payments on your credit report for a certain period of time.
The exact time varies by:
 - the type of information
 - the province or territory you live in
 - the credit bureau that created the report
Positive information
A credit bureau may keep positive information, like payments made on time, in your credit report for longer. Positive information will help your credit score.
Negative information
Generally, negative information stays on your credit report for 6 years. However, certain information may remain for a longer or shorter period of time. Negative information can hurt your credit score.
Negative information can include:
 - missed payments on a debt
 - bounced cheques
 - accounts that were sent to collections
 - Judgments
A judgment is a debt you owe through the courts due to a lawsuit. For example, if somebody sues you and you lose, then the debt may show up on your credit report.
Usually this information stays on your credit report for 6 years.
However, TransUnion keeps this information on file for 7 years in the following provinces:
New Brunswick
Newfoundland and Labrador
Ontario
Quebec
TransUnion keeps this information on file for 10 years in Prince Edward Island.
 - Consumer proposals
A consumer proposal is a legal agreement set up by a licensed insolvency trustee. The trustee creates a proposal for your creditors where they agree to let you pay off a percentage of your debt.
Equifax removes a consumer proposal from your credit report 3 years after you've paid off all of the debts included in the proposal.
TransUnion removes a consumer proposal from your credit report either:
3 years after you've paid off all of the debts included in the proposal, or
6 years after you sign the proposal (whichever is sooner)
 - Bankruptcy
Generally, both Equifax and TransUnion remove a bankruptcy from your credit report 6 years after the date you're discharged.
TransUnion removes a bankruptcy from your credit report 7 years after you're discharged in the following provinces:
New Brunswick
Newfoundland and Labrador
Ontario
Prince Edward Island
Quebec
If you declare bankruptcy more than once, then the bankruptcies will appear on your credit report for 14 years.