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Understanding your credit report

Your financial reputation affects your rating

What is a credit report?

Equifax and TransUnion are the two main credit bureaus in Canada. These private organizations collect and store financial information on all Canadians. Before financial institutions agree to give you a loan or a credit card, they consult these companies to find out your credit history and credit rating. However, no one can access this information without your consent.

Consult your credit report for free

You can access your credit report from Equifax or TransUnion by filling out the request form at or You can also request your report in person, by phone, or by fax. You can get a monthly online subscription to immediately gain access to your credit report at all times, but such subscriptions are rather expensive.

Monitor your credit rating

False information entered into your credit report can negatively influence your rating. That’s why it’s so important to correct any errors if you want to improve your credit. You can access your Equifax or TransUnion credit report for free so you can check the information and correct any errors. The information often needs updating. For example, if an old account you don’t use anymore such as a store credit card is “lingering” in your report, you should contact the former lender and ask them to close your account. You also need to make sure that TransUnion or Equifax is made aware of the change so your report indicates that the account was closed at your request.

Your financial picture: a matter of image

Here are five key factors financial institutions consider before agreeing to give you a loan, a line of credit, or a credit card :

  • Your debt ratio (assess your debt ratio);
  • Your Equifax or TransUnion credit rating;
  • Your monthly income;
  • Your assets;
  • Your job stability and place of residence.

Do financial institutions consider you a good credit risk?

Credit bureaus will assess your credit history by collecting information from lenders and using it to assign you a credit rating from 1 to 9, where 1 means you pay your bills within 30 days and 9 means the lender wrote off your account or transferred it to a collection agency. Your rating also comes with a letter. The most common is “R,” which means you have revolving credit, such as a credit card. An “I” means you were given credit on an installment basis, such as for a car loan, and an “O” means open credit, such as a line of credit. Lenders send these ratings to credit bureaus such as Equifax and TransUnion to inform them how and when you make your payments.

The two tables below explain the numbers and letters used to summarize your credit habits.

R Revolving
O Open
I Installment
L Lease
C Credit line
M Mortgage

0 Too new to rate; approved but not yet used
1 Pays (or paid) within 30 days of billing or has no more than one late payment
2 Pays (or paid) 31-60 days late or has more than two late payments
3 Pays (or paid) 61-90 days late
4 Pays (or paid) 91-120 days late or has more than four late payments
5 Pays (or paid) more than 120 days late or has more than four late payments, but not yet rated 9
7 Makes regular payments under a consolidation order, credit, or similar agreement
8 Repossession
9 Bad credit, sent to a collection agency, disappeared

Source : Equifax Canada Co.

Your credit score is crucial

Your credit score is a snapshot of your financials at a specific moment. It’s a three-digit number that is calculated using a mathematical formula based on the information in your credit report. Your score is compared to data from other consumers to determine how much of a risk you pose to lenders. Lenders and other financial institutions use your credit report and credit score to determine how risky it is to lend you money. Lenders also use this score to set your interest rate and credit limit. Remember—you get points for transactions that demonstrate you can use credit responsibly, but you lose points for transactions that show you have difficulty managing credit. Your score changes over time and you can improve it by using credit wisely.

Five factors that influence your score

Even if you have a low score, there are some simple things you can do to improve it. Take a look at the factors that affect your score the most, such as how much your use your credit card, how regularly you pay your bills and apply for new credit, and what changes you can make quickly to improve your score.

1) Your payment history (35%)
When you don’t pay your accounts on time, payments over 30 days late are noted in your report. If you pay off your balance in full but after the due date, it will lower your score and be noted in your report for six years.

2) Use of credit (30%)
Try not to use more than 50% of the available limit on your credit card so as not to lower your score. For example, if you have a limit of $500 on your credit card, try not to use more than $250. If you use all of your available credit, it tells the credit bureaus that you are in financial distress, even if you pay off the balance in full each month.

3) Length of credit history (15%)
Hang on to your older accounts because they give lenders a better overview of your payment habits. A longer credit history will improve your score. Avoid opening new accounts.

4) New credit (10%)
When you apply for credit (such as a car loan, line of credit, or credit card) at a financial institution, the institution will consult your credit report to find out your score. This simple inquiry gets noted in your report and can lower your rating. That’s why it’s important to group all your loan applications together or do them separately but within a short period of time so the credit bureaus only note one inquiry in your report. Avoid applying for new credit cards simply to get a discount, welcome gift, or other reward. Accepting this type of offer can lower your credit score—even if you don’t use the card—because it will look like you need more credit.

5) Mix of credit (10%)
The more accounts you open, the more debt you could get yourself into. At least that’s what financial institutions think. So avoid opening several of the same types of accounts, like credit cards. Just use one. However, if you have a variety of account types—personal loan, car loan, line of credit, mortgage—and you are managing your payments wisely, it will actually improve your score.