How to Read Your Credit Report (2024)

Your credit report summarizes your credit history and helps lenders weigh your credit risk. Often your credit report is initiated when you apply for your first credit card. Over time it can help you reach your larger financial goals such as obtaining a rental agreement or mortgage. When you apply for a credit product, you may request your report to get one number—your credit score. But that detail is just one aspect among a long list of confusing text and alphanumeric codes. Credit reports can seem cryptic and hard for the average consumer to interpret. However, reading and understanding them is an essential part of maintaining good credit and healthy financial habits.

In Canada, consumers are allowed to request their credit report free of charge at least once a year from the two main credit bureaus, Equifax and TransUnion. Asking for your information from one reporting agency and then the other every six months can help you stay up to date with your credit report and ensure the information is accurate.

Here’s a quick guide to what your report contains and who is allowed to use it.

  • Your credit report
  • Who is allowed to use your credit report?
  • Do credit bureaus approve credit applications?
  • How to clean up your report

Your credit report

Although your credit report will look somewhat different from each bureau and may contain slightly different information depending on the details shared by creditors, the codes and ratings are the same. The Financial Consumer Agency of Canada (FCAC) has sample credit reports from Equifax and TransUnion to illustrate the information that typically appears on a credit report.

Every consumer’s credit report will vary because of personal details like employment and credit inquiries but will contain the following fundamentals.

Personal information

It is important to keep your personal information up to date.

  • Name
  • Date of birth
  • Address (current and previous)
  • Contact details (current and previous phone numbers)
  • Social insurance number
  • Driver’s licence number
  • Employer and job title (current and previous)

Your credit score

This score will directly impact the interest rate you qualify for when applying for a loan. An algorithm calculates your credit score and reflects your creditworthiness, and the risk of delinquency you pose to a lender. Credit scores range between 300–900. Generally, scores above 760 are considered excellent, while those with scores below 600 may find it more challenging to get credit.

Financial information

Positive and negative information will appear on your credit report:

  • Non-sufficient funds payments (NSF)
  • Bad cheques
  • Bank accounts that have been closed due to amounts owing or fraud
  • Credit limits and balances on credit cards including retail store cards
  • Missed or late bill payments
  • Lines of credit
  • Loans
  • Debts sent to collections
  • Liens
  • Bankruptcy
  • Fraud alerts and consumer statements

Product details

Each credit product should show the finer details like when the account was opened, how much you owe, if you are in good standing, and if you have missed payments or went over your credit limit.

You will see the total number of accounts you have that are open, closed, or have been classified as delinquent, as well as the balances and number of payments you have made.

Codes

The codes have two parts, a letter depicting the type of credit, and a number showing the status of your payments.

LetterWhat it stands forDefinition
IInstallment creditThis type of credit is a loan that is paid regularly in fixed amounts for a set term. For example, financing a car is an installment loan.
OOpen statusSome bills, like a mobile phone account, are considered open status credit, since you borrow money when you need to, up to a specific limit.
RRevolving or recurring creditYou may borrow money up to a set limit, on an ongoing basis, with fluctuating payments based on the balance. Your credit card is a revolving source of credit.
MMortgage loanGenerally, this is the type of loan used to buy a property.

According to theFCAC, any number code greater than one may hurt your credit.

NumberClassification
0This number can indicate credit that has been approved but may be too new to rate.
1This number is the best rating and means that you have paid your bill within 30 days as agreed.
2This number means you have a late payment between 31 to 59 days overdue.
3This number means you have a late payment between 60 to 89 days overdue.
4This number means you have a late payment between 90 to 119 days overdue.
5This number means you have a late payment that is more than 120 days overdue but hasn’t been classified as a “9” yet.
6It is unlikely that you’ll see this code as it isn’t used.
7This number can indicate you are using a debt management strategy such as a consolidation order, a consumer proposal or a credit counselling agency.
8This number can indicate a repossession.
9This number can highlight bad financial habits and likely indicates an item written off as bad debt, has been sent to a collection agency or a bankruptcy.

If you have a credit card in good standing, you will see R1 on your credit report. If you forgot to pay your car loan within the 30-day window, you would see I2 on your report.

Who is allowed to use your credit report?

According to the FCAC, credit bureaus are required to follow guidelines regarding who can see your credit report and how they can use that information.

Businesses or individuals that are allowed to see your credit report include:

  • Banks and other financial institutions
  • Credit unions
  • Car leasing companies (dealerships)
  • Retailers (if you need to finance appliances for example)
  • Mobile phone companies
  • Insurance companies
  • Governments
  • Employers
  • Landlords

They are allowed to use the information on your credit report to make the following decisions about you:

  • Lend you money
  • Collect a debt
  • Consider you for a rental agreement
  • Consider hiring you for employment or offer you a promotion
  • Provide you with insurance
  • Offer you a credit increase

If one of these organizations pulls your credit report because you have applied for credit, it may result in a hard inquiry. Hard inquiries are necessary anytime a lender is weighing your eligibility for approval. You may experience a drop in your credit score if you have too many hard inquires in a short period, and it may raise a red flag to lenders. That is why it is important to seek credit only when you need it.

If you, a lender, or business checks your credit score for informational purposes, it typically won’t result in a hard inquiry and won’t impact your score. These types of requests are considered to be soft inquiries and aren’t visible to potential lenders.

Do credit bureaus approve credit applications?

Some consumers may believe that credit bureaus are the ones deciding whether to give or deny credit. That’s a common misconception. These agencies provide credit reports, but the lender decides to extend credit based on the information in the report. Generally, lenders use the data in combination with a formula of their own to rate your creditworthiness and approve or deny your application.

How to clean up your report

Improving your credit score and cleaning up your credit report isn’t as simple as paying missed bills and becoming debt-free—although that can help. Paying your bills on time and consistently, never missing a payment, holding various credit accounts, and apply for credit only when you need it, can increase your score.

However, poor credit choices and bad financial decisions can stay on your report for upwards of six years, if not longer. That is why starting on the right foot, with a good understanding of your credit report and how it can affect your future financial choices is vital for reaching your goals.

Reviewing your credit report at least once a year can help you catch and report errors. If you think an item on your report is an error, first, contact both Equifax and TransUnion and notify them of the mistake. If the error is in your personal information, you should ask that the details be corrected. If the item is suspected to be fraud, request an alert on your credit report. Also, inform the Canada Anti-fraud Centre.

How to Read Your Credit Report (2024)

FAQs

How do I read my credit score? ›

Credit score ranges and what they mean will vary based on the scoring model used to calculate them, but they are generally similar to the following:
  1. 300-579: Poor.
  2. 580-669: Fair.
  3. 670-739: Good.
  4. 740-799: Very good.
  5. 800-850: Excellent.

What does 30-60-90 mean on a credit report? ›

Net 15 payment terms: This means an invoice is due in 15 days Net 30 payment terms: This means an invoice is due in 30 days Net 60 payment terms: This means an invoice is due in 60 days Net 90 payment terms: This means an invoice is due in 90 days. Net 30 and Net 90 are the most common payment terms.

What number indicates a good credit score? ›

However, in many popular scoring models, borrowers need a minimum score of 670 for their credit to be considered “good.” Overall, the higher your credit score is, the more likely you are to appeal to lenders. Higher credit scores indicate that a borrower has demonstrated responsible credit behavior in the past.

What is a good credit score to buy a house? ›

What is a good credit score range for buying a home? If your credit score range is between 740 and 850, you are likely to have the widest range of choices and the most attractive interest rates for your mortgage loan.

What is a decent credit score? ›

670 to 739: Good Credit Score

Lenders generally view those with credit scores of 670 and up as acceptable or lower-risk borrowers.

What does a bad credit report look like? ›

Key Takeaways. A person or business is considered to have bad credit if they have a history of not paying their bills on time or they owe too much money. Bad credit for individuals is often reflected in a low credit score, typically under 580 on a scale of 300 to 850.

What is the most important factor of a credit score? ›

Payment history — whether you pay on time or late — is the most important factor of your credit score making up a whopping 35% of your score.

Is it true that after 7 years your credit is clear? ›

In general, most debt will fall off of your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely. Certain types of debt or derogatory marks, such as tax liens and paid medical debt collections, will not typically show up on your credit report.

What does C stand for on a credit report? ›

Rating for R/O/I/L/C/M: R: Revolving account, O: Open account, I: Installment account, L: Lease Account, C: Line of Credit, M: Mortgage.

What does p stand for on a credit report? ›

Here you can find out more about the defaults mentioned earlier in your Experian Credit Report, including how much you owe / owed when the account defaulted and the status of the default. For example P = Paid or S = Settled.

Is a 900 credit score possible? ›

While achieving a CIBIL Score of 900 is technically possible, it is extremely rare. Scores above 760 are considered very good or exceptional, providing significant benefits such as lower interest rates and higher chances of loan approval.

How rare is a 700 credit score? ›

Credit score distribution: How rare is an exceptional 800 to 850 score?
FICO® Score rangePercent within range
600-6499%
650-69912%
700-74917%
750-79924%
4 more rows
6 days ago

What is a good credit score to buy a car? ›

Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.

What are the 5 levels of credit scores? ›

For base FICO Scores, the credit score ranges are:
  • Poor credit: 300 to 579.
  • Fair credit: 580 to 669.
  • Good credit: 670 to 739.
  • Very good credit: 740 to 799.
  • Excellent credit: 800 to 850.
Jul 19, 2024

How do I read my FICO score? ›

Your FICO score is a number, typically in the 300 to 850 range, used by lenders to determine your ability to pay back borrowed debt. FICO has five credit score ranges. The company defines a good credit score as anything from 670 to 739.

How exactly is credit score calculated? ›

A FICO credit score is calculated based on five factors: your payment history, amount owed, new credit, length of credit history, and credit mix. Your record of on-time payments and amount of credit you've used are the two top factors. Applying for new credit can temporarily lower your score.

Is 650 a good credit score? ›

As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.

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