Credit rating know-how

If you’ve ever borrowed money then you have a credit report – and a credit score, a grade that tells potential lenders whether or not you’re a safe bet. A poor score can mean you get turned down for a loan or can’t get a mortgage on a house. Viewing your report and knowing your score up front means you could avoid nasty surprises when you need money most.

What is a credit report?
Your credit report contains details on all the loans you’ve taken out in the last six years – that includes credit cards, lines of credit and mortgages. The report shows how much you borrowed, whether you paid on time, and what you owe. Based on all of that, you’re given a score with a couple of pieces of information. There’s a number from 1 to 9 (1 meaning you pay your bills on time, 9 meaning you have trouble paying your bills). You’ll also get a letter in front of each number – R (revolving credit such as a credit card), I (credit on an installment basis like a car loan) or O (open credit such as a line of credit). R ratings are the most common – R1 is ideal. If your financial institution had to write off your loan because you never paid it back, you’d be an R9 (bad news).

How do I get a copy?
To access your report and find out your score, you need to go through one of the major credit reporting agencies in Canada – Equifax Canada and Transunion Canada. Your credit report is free if you choose a by-mail option that takes about 2-3 weeks. You have to pay to get your score (about $20 to $25). For a bit of extra money you can also access your report online right away.

What if I have a bad score?
Start by making sure that all the information in your report is accurate – keying errors and other mistakes can happen. If you do find any errors make sure you report them so they can be corrected. Canada’s Office of Consumer Affairs has information on how to do this. You should check your credit report regularly – a 2008 report by the CBC showed that not all are accurate and some contain errors that could stop you from getting a credit card or loan, even if you’ve never made a late payment. At the same time, you can find out who has tried to access your report – and whether or not anyone is trying to steal your identity.

How can I improve my score?
There are a few things you can do to improve your credit rating over time. Start by paying your bills on time and in full. Also, try and pay off your debts as quickly as possible. Don’t go over the limit on your credit card and keep your balance as low as possible – the higher it is, the bigger an impact it can have on your credit score according to the Financial Consumer Agency of Canada (FCAC).