Use your credit report to plan for the future
Everyone has a score on their credit report — a three digit number used by potential lenders, employers, landlords and insurers — to rank our financial reliability. Yet, 52% of Canadians don’t know their credit score and how their actions can affect this number.1
When planning your financial goals, knowing how you score on your credit report can help with setting priorities. Do you have any missed payments or overdue bills? Are you paying off a credit card with a high interest rate? These kinds of questions can help you figure out steps to take to build or improve your credit.
What is a credit report?
A credit report is the history — or summary — of the credit you use, such as credit cards and loans, and shows whether you’ve made your payments on time. Lenders, banks, utility companies, landlords and other credit grantors may send your payment activity to two credit bureaus in Canada, TransUnion and Equifax. Both credit bureaus provide information about your credit history in two ways: a credit report and a credit score.
A good credit score will show you’re financially responsible."
When you apply for credit or a job, or are looking to rent an apartment, your credit history may be pulled. A good credit score will show you’re financially responsible, and can also help you receive lower interest rates on loans and credit cards.
Keep in mind that having no credit can be a setback on your credit applications. When you don’t have a credit history there’s nothing to show potential lenders how reliable you are with payments.
What does your credit report say about you?
Your credit report is essentially a report card on how well you manage money. It contains personal details such as your name, date of birth, current and previous addresses and employers. The report also includes information about your credit history, such as:
- bank accounts
- credit you already have, e.g. credit cards, lines of credit and loans
- debts that were referred to collection
- public records such as bankruptcies and judgments
- a list of inquiries made about your credit (i.e. by lenders, landlords, employers)
What score to aim for?
Your credit score is the grade you receive on your report. In Canada, credit scores range from 300 to 900 points. Make it a goal to have a credit score of 660 and above.
More than half of Canadians have earned an Excellent credit score.2 If you’re not there yet, don’t worry! There are many ways you can build or improve your credit.
Tips to get ahead
We asked Alisha Clark – a Fairstone Branch Manager in Moncton, New Brunswick – to offer some advice on how you can get ahead financially.
“Focus on reducing balances on the highest interest rate debts first – such as credit cards. A good rule of thumb is to keep these balances below 25% of your credit limit,” says Alisha. “Also, it’s imperative to make your minimum payment every month. This will show lenders you have a record of paying bills and debts on time.”
Alisha also says it takes time to establish history with credit bureaus. Your score is updated every 30 to 60 days, and lenders report at different times of the month. If you stay within your credit limits and make payments on time, you’ll start to see progress on your report.
Ready to check your credit report?
Your credit report is a snapshot of everything you need to know about your financial situation. It’s a good idea to request your report every year to ensure you’re getting the full picture of your credit history. Check that your personal information is correct and that no one has stolen your identity. If you notice any errors, contact the credit bureau immediately and notify them of the issue.
Remember, your credit history is a work-in-progress that changes over time. Understanding what you can do to build or improve your credit can help you work towards your financial goals and plan for the future. Visit TransUnion and Equifax to request a copy of your credit report and credit score.
This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.
1 “Don't get a bad grade on your 'adult report card'.” Globe and Mail. 26 May, 2016. Web.
2 “Understanding your credit report and credit.” Financial Consumer Agency of Canada. 17 June, 2015. Web.