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There are a number of things a business will look at before approving you for credit. Understanding these things can help you in the process.
When you apply for credit, a business will first decide whether or not to extend credit to you. On the one hand, they want to sell you a service or product and make money from it. On the other, they do not get paid right away and there is a risk of not getting paid at all.
The business will ask for information from you to help them assess the risk of giving you credit. Some of the things they may ask for are:
Most will also check your credit report and credit score.
A credit report contains information about your credit history and some personal information. This information can be provided by creditors or lenders or taken from public records.
The information on your credit report is collected by a credit reporting agency. In Saskatchewan, The Credit Reporting Act is the law that regulates credit reporting agencies. All credit reporting agencies must be licensed. They have a responsibility to provide accurate and fair information. The two credit reporting agencies in Canada are Equifax Canada and TransUnion Canada.
Credit reports generally include the following types of information:
Providing false information to a credit reporting agency is an offence that can result in a fine and even jail time.
The information that is in a credit report must be based on the most reliable evidence reasonably available.
The following information cannot be included:
Other information is allowed but subject to certain conditions, such as information about:
The government or police can see your credit report without your consent or notice to you. The information provided in this case is limited to your name, address and employment.
The information in your credit file can only be released to certain people. This includes someone who needs to see it to make a decision about your application for credit. It can also be viewed by those with a legitimate business purpose, such as for insurance, employment or a tenancy.
The person requesting the credit report must get your consent or give you written notice that a credit report will be obtained. They must provide you with the name and address of the credit reporting agency that will provide the report.
Credit reporting agencies must have trained personnel available to explain information on a credit report to you.
You can order a free copy of your credit report from either of the two credit reporting agencies. You may want to order from both as the two different companies can have different information. Both companies refer to this as consumer disclosure. You can order your report by mail or fax using the forms provided by the agency. You must also provide copies of two pieces of acceptable identification, such as a drivers’ licence or a passport.
You can request your report by calling:
If you phone, you will have to answer personal and financial questions to confirm your identity. You may be asked for your Social Insurance Number or a credit card number to confirm your identity.
Your credit report will be mailed to you. You can choose to pay a fee and see your credit report online instead. TransUnion allows consumers to view their report online for free once per year.
Asking for a credit report will not affect your credit score. However, information from your application for a credit report can be used to update your credit report. Your credit report is not the same as your credit score. You will generally have to pay to see your credit score.
Mistakes can occur when it comes to the information on your credit report. If you think there is inaccurate information on your credit report, you can dispute it. Information about the dispute process can be found on both the TransUnion and the Equifax sites. You can submit a dispute online or complete and mail the forms provided by the agency along with any required documents. TransUnion also takes these requests by phone.
Credit reporting agencies must investigate any information you dispute. If they find that anything is inaccurate, they must remove or correct it. They will also notify anyone that has received your credit report in the last twelve months about the corrections or deletions unless you request otherwise.
After the investigation, the agency may be of the opinion that the information on file is reasonably accurate and should not be deleted. In this case, the agency will notify you of your right to file a brief statement outlining your dispute. Your statement disputing the information will then be attached to your credit report. From then on, it will form part of your credit file. Anyone who received your credit report in the preceding six months will also be advised of the dispute unless you request otherwise.
A credit report provides a summary of your financial history. It includes information about your borrowing and payment history. Your credit score is determined by using a statistical formula. It takes information from your credit report and other sources to create a three-digit score. Lenders can then use this score to predict the likelihood that you will repay the debt.
Because TransUnion and Equifax may use different formulas, your credit score with each company may be different. The type of information used to calculate your credit score includes:
You can find out your credit score for a fee from either or both of the credit reporting agencies in Canada. Some other companies, such as your bank, may also provide it to you.
Having a bad credit score can cause problems when you apply for new credit. However, it can be just as much trouble to have no credit score at all. This can happen in a spousal relationship where only one of the partners manages or controls household finances. In this case, the other partner may not have a credit score. A bank or business might be reluctant to grant credit to a spouse who does not have an established credit record. The spouse may be denied credit altogether or be forced to have someone co-sign or provide a guarantee.
For this reason, it is important for spouses to establish their own credit rating. Having a credit account in your own name and paying it on time can help establish a positive credit score. A spouse can do this without the consent or involvement of the other spouse.
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