There’s something about a credit report that makes people take leave of their senses much like getting a letter in a brown envelope that's clearly not a cheque marked Government of Canada.
I know this because one of the biggest meltdowns I've ever had involved both at once. During the 2004 tax year I received a letter from the Government telling me in a rather generic format that I owed them $47.12 and the payment was past due. I neglected to declare some capital gains because the amount was so nominal I couldn’t be arsed to find the paperwork. Foolish. You live, you learn and all that. I called them in the midst of hysteria and asked if I was going to be deported for my ‘oversight’ and subsequent debt to the crown. Suitably reassured by a rather bemused customer service agent that I wouldn’t be shipped out on the next boat I then demanded to know if I would be reported to the credit bureau. He barked “no!” and all was well again.
To do even the simplest of things these days like book a hotel or order concert tickets you must have a credit card and good luck to you in getting a credit card if you have a bad credit rating. Any wonder we’re all so touchy about our credit reports!
A credit report is a snapshot of how you pay your bills. It's used by lenders to determine if you're credit worthy. However a credit check is increasingly becoming a requirement for potential employers and landlords. It’s never been more important to have a good credit rating.
You need to know what lurks in your credit report and it's recommended that you get a copy every year even if you have no future borrowing plans.
In Canada there are two major credit reporting agencies.
Equifax: 18004657166
TransUnion: 18665250262 or 18777133393 for Quebec.
Visit our credit score section on how to improve your credit score to find out how both agencies will mail you a copy free of charge. You can also order a copy online, for a fee and this will include your elusive credit score. You're report will often be delivered to you in your chosen format in double Dutch but panic not! Here are a few pointers to help you decode your report.
You'll notice that the ratings come in the form of letters and numbers e.g. I1, O2 and R7.
'I' denotes an instalment loan. A type of credit that is issued in a lump sum and repayments are fixed amounts for a set period of time. e.g. a car loan.
'O' denotes open credit where you draw the money when needed and the total balance is due at the end of each period. e.g. a line of credit.
'R' denotes revolving credit and is the most common type. You're payment varies depending on the balance and you can borrow funds anytime up to your credit limit. e.g. a credit card.
The letters aren't your biggest worry though, as always, it's the numbers you need to pay attention to!
I’ve carefully cut and pasted this handy chart from the Equifax website.
| R0 | Too new to rate; approved but not used. |
| R1 | Pays (or paid) within 30 days of payment due date or not over one payment past due. |
| R2 | Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due. |
| R3 | Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due. |
| R4 | Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due. |
| R5 | Account is at least 120 days overdue, but is not yet rated "9." |
| R6 | This rating does not exist. |
| R7 | Making regular payments through a special arrangement to settle your debts. |
| R8 | Repossession (voluntary or involuntary return of merchandise). |
| R9 | Bad debt; placed for collection; moved without giving a new address or bankruptcy. |
| Other rating indicators that might be found on a report are "I" for installment credit or "O" for open credit line. | |
Source: Equifax Canada
If you see something on your report that is incorrect you need to notify the bureau right away. If there are R9's and you're not disputing them call us and we can help you with a plan of action for repayment. Derogatory information that has not been reported in error cannot be removed from your report, no matter how much you pay a company who claims they can repair your credit for a fee.
The Financial Consumer Agency of Canada (FCAC) has an amazing website with a wealth of information on credit reporting including tips on how to improve your credit score, time frames for reporting and even has a quiz and sample credit reports from both bureaus. Who doesn't love an interactive quiz?!
Their website is a one stop shop for information on all financial products and services. You'll find everything you need to know from details on how to open a personal bank account to borrowing on home equity, fraud issues and saving for your child's education.
Frequently Asked Questions
Have a question? We are here to help.
What is a Debt Consolidation Program?
A Debt Consolidation Program (DCP) is an arrangement made between your creditors and a non-profit credit counselling agency. Working with a reputable, non-profit credit counselling agency means a certified Credit Counsellor will negotiate with your creditors on your behalf to drop the interest on your unsecured debts, while also rounding up all your unsecured debts into a single, lower monthly payment. In Canada’s provinces, such as Ontario, these debt payment programs lead to faster debt relief!
Can I enter a Debt Consolidation Program with bad credit?
Yes, you can sign up for a DCP even if you have bad credit. Your credit score will not impact your ability to get debt help through a DCP. Bad credit can, however, impact your ability to get a debt consolidation loan.
Do I have to give up my credit cards in a Debt Consolidation Program?
Will Debt Consolidation hurt my credit score?
Most people entering a DCP already have a low credit score. While a DCP could lower your credit score at first, in the long run, if you keep up with the program and make your monthly payments on time as agreed, your credit score will eventually improve.
Can you get out of a Debt Consolidation Program?
Anyone who signs up for a DCP must sign an agreement; however, it's completely voluntary and any time a client wants to leave the Program they can. Once a client has left the Program, they will have to deal with their creditors and collectors directly, and if their Counsellor negotiated interest relief and lower monthly payments, in most cases, these would no longer be an option for the client.
