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What is a credit report and what does it mean for newcomers to Canada?

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KEY TAKEAWAYS

✔ As a new Canadian, you’ll need to build a fresh credit history because the personal financial information from your home country does not travel with you.

✔ A credit report is like your financial resume. It shows your credit history in Canada and tells lenders how you use credit.

✔ Employers, landlords, banks and credit companies use your credit report to understand what you owe, how much you’ve borrowed, and your payment history.

When you first arrived in Canada, you came with your favourite belongings and began to set down roots. What didn’t travel with you is your credit history. That’s because countries don’t share any of your personal financial information. 

This means you’ll have to build your credit history in Canada to create your credit report. It works like this: every time you borrow money, pay rent, or make a payment on a credit card, that information is added to your Canadian credit report. 

Here’s a breakdown of how the report works:

What is a credit report?  

A credit report captures your financial and credit history and tells a lender how you use and manage credit. In Canada, your credit report is housed at two credit reporting agencies Equifax and TransUnion. With your permission, they collect, store, and share your credit information with people (like employers) or companies (like banks).  

How is a credit report used?

Whether you’re applying for a loan, an apartment or a job—lenders, landlords and employers may ask for permission to view your credit report because it’s like your financial resume. It lets them see your credit history, such as how much you’ve borrowed, how much you owe, and the payments you’ve made. Here’s a sample of what’s included and not included in a credit report:

What it includes:

  • Personal information (name, address, DOB, SIN)
  • Employment history 
  • Credit history – payments made to lenders (retail stores, finance companies, banks)
  • Inquiries from lenders who have requested your credit report. 
  • Your current debt (credit, retail, store card, line of credit or loan) 
  • Payment habits (late payments, minimum payments, on-time payments)

What it doesn’t include

  • Borrowing and payment history outside of Canada, before you arrived
  • Your income
  • Purchases made with cash or cheques
  • Information about your personal or business accounts
  • Medical history, ethnicity, political affiliations
  • Any criminal record

See the full list of what’s in your credit report.

What are those codes on a credit report?

Credit reports use letters and numbers to keep everything clear and organized. Letters identify the type of credit you have. For example, “R” stands for revolving credit like credit cards or lines of credit. 

Numbers ranging from 0 to 9 (excluding 6 which isn’t used) indicate when you make payments. For example, “4” designates a payment that is over 90 to 119 days late. So lower numbers are always better than higher ones. 

Letter  

Type of Credit

I

Installment credit - regular payments in fixed amounts like a loan

O

Open status credit - borrowing up to a limit, like a mobile phone account

R

Revolving credit - like a credit card

M

Mortgage loan - loan used to buy a home

NUMBER                 PAYMENTS MADE

0                               No rating because you haven’t used credit yet.

1                               Paid within 30 days of billing.

2                               Late payment: 31 to 59 days late.

3                               Late payment: 60 to 89 days late.

4                               Late payment: 90 to 119 days late.

5                               Late payment: more than 120 days late, but not yet rated “9”.

7                               Making regular payments using debt management.

8                               Repossession:  For example, an auto lender takes back a vehicle when you don’t make payments.

9                               Written off as a “bad debt”, meaning it was sent to a collection agency or you declared bankruptcy.

Here’s an example of how the coding works: you have a credit card and you’ve made a payment within 30 days of it being due. That would show on your credit report as R1 – R being Revolving Credit and 1 being paid within 30 days of billing. 

Credit report vs credit score

Credit bureaus and reporting agencies regularly receive records of your financial activity such as the type of credit you have and how much you owe, and your credit report captures this activity and data. On its own, it’s just information. 

Your credit report becomes important when this financial information and credit history gets used to create your 3-digit credit score—an important number as lenders use it to determine if you are eligible to borrow. Credit scores range from 300 to 900. The value of the score is driven by your credit behaviour and payment history. Poor money habits like missing a payment or late payments will lower your score. 

Where to get your credit report 

You can get a copy of and view your credit report for free once a year from each of Canada’s two credit bureaus, TransUnion and Equifax. Requesting one in January and the other in June will give you a free snapshot of your financial history. Take some time to review the information for accuracy and know your credit score. If you notice mistakes, here’s how to get them fixed.  

To keep your report in good standing now and in the future, be sure to practice good money habits like making on-time payments on credit cards, bills and loans. 

Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.