Credit Rating FAQs

Credit bureaus are independent companies that keep up-to-date records on the way every individual and business in Canada manages their credit. They operate under both Federal and Provincial laws that regulate how they may store and update this information.

Their customers are the financial institutions and other companies that extend credit to you. Before approving you for credit, most financial institutions will want to know how well you manage credit. Rather than check with each company that has ever lent you money, they will ask one or both of Canada's credit bureaus for a credit report/credit history.

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Your credit history is a measure of how reliable you are when it comes to repaying your debts.

If you've ever applied for credit in Canada, you will likely have a credit file, kept at both of the country's two main credit bureaus, Equifax and Trans Union of Canada.

The information in your credit file includes your birth date, address and employment information, as well as a comprehensive history of the credit you use now or have used at any time in the past 6 years—or even longer if you've ever declared bankruptcy. This history is kept up-to-date by the banks, credit card companies, retailers, auto lease financing companies and other establishments that provide you with credit.

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The first time you ever apply for credit, you begin to establish a credit rating history. The simplest way to keep it positive is to always make at least the minimum payment on all your credit, on or before the due date.

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Depending on provincial legislation, negative items on your credit report will be deleted after six or seven years. Generally, where there is no negative information, loans or other credit facilities that you have repaid in full remain on your file permanently.

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When a lender asks for a credit report on you, the credit bureau will extract information from your credit file. The report will include information that identifies you, a detailed history showing how you manage your credit, any judgments against you, any bankruptcies you may have experienced, a list of companies that have enquired about your credit history and anything else that may be important to a lender.

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Only members of the credit bureaus may request a credit report—and they can only do so with your permission. Most credit applications will include a statement that gives the lender permission to request your credit history from the credit bureaus.

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Most lenders will assign an "R" (for Revolving credit, such as a line of credit) or "I" (for Installment loans) rating to each item in your credit report. The rating scale ranges from 1-9. For example, a rating of R0 means the particular item is too new to rate. A rating of R1 means you pay within 30 days of the due date—and a rating of R9 reflects a bad debt.

If you consistently pay at least the minimum amount owing on your credit cards or lines of credit, don't miss making loan or mortgage payments, and pay all your other accounts by the due dates, you will likely receive a good rating on all your credit. In contrast, if you often miss payment dates, your credit history will most likely result in a poor rating and perhaps a rejection from the lender if you are applying for new credit.

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If you maintain a good credit history, which demonstrates that you repay your debts on time, lenders are more likely to consider you to be a lower risk. Depending on the credit product that you are applying for, they may be prepared to offer you lower interest rates because they are confident that you will repay your credit. When granting credit to someone who has a weak credit rating, lenders may charge a higher interest rate to protect themselves against the higher risk.

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It could, yes. A life event that reduces your income (such as a divorce) and/or increases your expenses (for example, a new baby) may mean that you have less available money to take on new debt. In contrast, a life event that increases your income and/or reduces your expenses may make you even more credit-worthy, as the additional income will enable you to take on more debt.

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The information in your credit file is provided to the credit bureaus by the companies you borrow from. As a result, it should be accurate and up-to-date. To make sure it is—and to ensure that you have not become the victim of identity theft—it is a good idea to check your credit history on a regular basis.

Canada's credit bureaus will send you a copy of your credit report by mail, free of charge. Alternatively, for a fee, they will allow you to view it online.

For more information, contact the credit bureaus directly:
Equifax
Phone Number	1-800-465-7166
Website	www.equifax.ca
Trans Union of Canada
Phone Number	1-866-525-0262
Website	www.tuc.ca

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The credit bureaus give you the opportunity to correct any inaccurate information in your file. If you follow their procedures, they will investigate your complaint and make any amendments necessary. If you're still not satisfied, you can add a brief statement to your file, explaining the item to prospective lenders.

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Often, a lender's credit application will ask you to provide a personal reference. This would be the name of somebody who knows you and can vouch for you.

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If you are currently behind on your credit payments, establish a strong repayment pattern as soon as possible. There are many simple ways to do this. With many companies you can set up automatic withdrawals to pay your account. If you bank online, you can usually set up automatic transfers to pay your accounts. Until you begin to establish a repayment pattern, lenders will be reluctant to offer you additional credit. If they do offer you credit, they may require collateral (such as cash) or a qualified co-signer.

You may also want to talk to a knowledgeable RBC Royal Bank credit specialist. He or she can answer your questions, provide guidance and suggest ways to improve your credit history.

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