Understanding Your Credit Report

The first time you apply for credit or borrow money from a lender, your credit file is created. From that moment forward, any company that lends you money, issues you a credit card, or provides a service (cell phone companies and some utilities) will send information regarding the financial transactions you make to Canada’s two credit-reporting agencies. The information is used to determine your credit score, as well as outline your credit history in a document known as your credit report.

Your credit report is essentially a snapshot of your credit history, which lenders use to determine whether or not they should give you more credit. It’s suggested that you pull your own credit report from one of the two agencies (Equifax or TransUnion) at least once a year, so you can see where you stand with your creditors, as well as review it for any inaccuracies. The document sounds simple enough, but it's not always easy to digest. The next time you decide to pull yours, here’s everything you need to know about how to read your credit report.


What’s Included in Your Credit Report?

Your credit report consists of:

  • Your personal information (your name, address, birthday, social insurance number and employment history)
  • Your credit history (information on all your accounts including: the date you opened the account, the loan amount or limit, the balance, payment terms and payment history)
  • Any inquiries made (a record of everyone who has tried to request access to your report, and when)
  • Any collections information (including liens on your property, bankruptcies filed within the last seven years, etc.

Due to the sensitive nature of the information included in your credit report, everyone who makes an inquiry must do so only with your permission.


When Would You Access a Credit Report?

There are a few reasons you, or someone else, may want to review your credit report:

  • After you’ve applied for credit or to borrow money, a lender will want to review your credit report to determine if you are a qualified borrower
  • The same is also true if you apply to finance a large purchase, such as a vehicle through an auto loan
  • Many property management companies and landlords will want to review your credit report to determine if you have regularly paid your obligations on time each month in the past
  • You want to review it for any inaccuracies or to see where you might stand with current and future lender
  • In some cases, a future employer may also pull your credit report

How Do You Read Your Credit History?

Once you actually sit down to review your credit report, you’ll find most of it is fairly straightforward. However, the one area where things get tricky is your credit history—specifically, the two-digit code that sits beside each of your accounts.

The code starts with one of three letters:

  • “I” illustrates that it’s an installment, which means you have borrowed money and have to repay a fixed amount on a regular basis, until the loan is paid off. (Example: Mortgage or car loan.)
  • “O” means it’s a form of open credit, so you can borrow money whenever you need to, up to a certain limit, and you usually only have to pay the interest on it each month or starting on a set date. (Example: Student loan or line of credit.)
  • “R” shows that it’s a revolving credit, which means you can borrow money up to a certain limit, and must make regular payments in varying amounts depending on how much of your limit you’ve spent. (Example: Credit card.)

After the letter, you’ll see a number on a scale from 1 to 9: 1 means you always pay your bills within 30 days of their due date, and 9 means you never pay your bills–ever—and may even signal you’ve made a consumer debt proposal to the lender.

View two example credit reports here—one from Equifax and one from TransUnion—provided by the Financial Consumer Agency of Canada (FCAC).

Since “R” is the most common type of credit found on credit reports, there’s actually a North American Standard Account Rating system1 outlined for it. If you see any of the codes below in your credit report, here’s what they indicate:

R0 Too new to rate; approved but not used.
R1 Pays (or paid) within 30 days of payment due date or not over one payment past due.
R2 Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due.
R3 Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due.
R4 Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due.
R5 Account is at least 120 days overdue, but is not yet rated "9."
R6 This rating does not exist.
R7 Making regular payments through a special arrangement to settle your debts.
R8 Repossession (voluntary or involuntary return of merchandise).
R9 Bad debt; placed for collection; moved without giving a new address or bankruptcy.

Legally, any “negative” information, such as missed payments, collections and consumer reports, can only be kept in your credit history for a specific period of time.


How Do You Access Your Credit Report?

As we’ve said, it’s suggested you check your credit report at least once, if not twice, each year. There are two ways you can access it:

  • By mail (send a written request to one of the credit-reporting agencies and they’ll send you a copy of your credit report for free. Note that your credit score is not included in this report and it may take a few weeks to receive it in the mail.)
  • Online (visit one of the credit-reporting agency’s websites and pay a small fee to instantly access both your credit score and credit report).

If you find any errors in your credit report, you must report it to both credit-reporting agencies as it will take time for them to investigate and fix the error.


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References and Notes

  1. Credit Report, Office of Consumer Affairs