How to Understand Your Credit Report

A credit report is a very important document.

You must be able to understand the information it provides in order to make use of it. The best habit is to adopt a regular routine of checking your credit report.

It is recommended to do so once every year so that you can take required steps in order to maintain good credit score as well as keep track of any errors that may have been added into the report.

Here is a guide to help you decode your credit report.


The information you can find on your credit report

A credit report has thorough information. You will find some basic information about your credit cards or loans if there were any.

Firstly, the date of when you opened your account will be mentioned. Then you will find some payment details. This will include the payments you have paid on time, payments you have not paid on time, payments you missed, as well as the amount you owe, if applicable. If your debt has been transferred to a collection agency that will also be mentioned in the report.

Next, information that is personal but available in public records will be given in your report as well. This includes information like bankruptcy, etc. Lastly, if you had gone over your credit limit, it will be a part of the report as well.

Some other information that your Canadian credit report may include are details of bad cheques. Any fraud history that may have resulted in the closing of your account will be a part of the report too. The list of credit you use, whether it is a credit card, retails card or any other information like that will be a part of the detailed report.

Next, you will also find details of registered items, which the lender has the authority to seize the item in case you fail to make full payments.


What you should look for on your credit report

Despite the long list of information, you can look for certain things to read the report easily. This will make understanding the document much easier.

You will notice that all information is written in the form of codes. The code will have two parts: an alphabet and a number.

The letter indicates the type of credit and the number tells when the payment is made. There are four main letter categories. “I” is used for Installment credit, “O” is used for Open status credit, “R” is used for Recurring credit, and “M” is used for a mortgage loan.


Number range from 0 to 9, with 9 being bankruptcy.

The number 0 is an indication of a payment that is approved, but not used for any further financial payment as of yet. It means that your payment is too new to be rated. The number 1 means that the payment was made within 30 days or within the required period.

If the payment was late, from 31 to 59 days after the billing, it is numbered 2. For a 60 to 89 day late payment, it is labeled number 3.

For 90 to 119 days after the billing without any payment, it is a number 4 and 120 days late payment is the number 5. Number 6 is not used as a code.

However, 7 indicates that the user is paying regularly using a consolidation order, a consumer proposal, orderly payment of debts, or debt managing program. The number 8 is used for repossession scenarios. 9 is the worst in terms of bad debt. By this stage, the debt is forwarded to a collection agency.


So what is right?

The best situation is when you have the number 1 with all your payments. Any other number means that your credit score is not in the best form.

This may sound confusing right now. However, you can visit online official websites that have sample credit reports to help you understand the information in a better way. However, these samples do not have full details as a real credit report has.

You can visit the TransUnion Canada website or Equifax Canada website to look through these samples.


Where to get your credit report from

Every citizen of Canada is entitled to receive a credit report free of cost every 12 months. You can receive the report from the financial bureaus of your country. If you wish to access the credit report more than once a year, you can simply buy it.

It is highly recommended that you put in extra effort to understand your credit report so you can avoid applying for bad credit loans.