Financial Consumer Agency Of Canada
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When unforeseen circumstances cause your credit score to drop, it’s nice to know there are steps you can take to repair it.

Here are some tips from the Financial Consumer Agency of Canada (FCAC) on how to improve your credit score:

  • Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
  • Try to pay your bills in full by the due date. If you aren't able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
  • Try to pay your debts as quickly as possible.
  • Don't go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.
  • Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
  • Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card. See the next section to find out how.

 

Credit Report / Credit File

Along with the credit histories of millions of other people, your credit history is recorded in files maintained by at least one of Canada's major credit-reporting agencies: Equifax Canada and TransUnion Canada. You can consult the agencies' websites in order to obtain more information on obtaining your credit report for free. A credit report is a "snapshot" of your credit history. It is one of the main tools lenders use to decide whether or not to give you credit.1

Your credit file is created when you first borrow money or apply for credit. On a regular basis, companies that lend money or issue credit cards to you, including banks, finance companies, credit unions and retailers send specific factual information related to the financial transactions they have with you to credit reporting agencies.2

Summary of methods to request your credit report and their respective characteristics

Methods

Advantages

Disadvantages

Mail

  • Free of charge
  • Credit score is not provided
  • Can take some time to receive
 

Internet

  • Almost instant report
  • Option to get credit score
  • Fee charged
 

Credit Score1

Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers.

There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. The higher your score is, the lower the risk for the lender. Lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay.

Credit Rating1

Some credit-reporting agencies report the lenders' rating of each of your credit history items on a scale of 1 to 9. A rating of "1" means you pay your bills within 30 days of the due date. A rating of "9" means that you never pay your bills at all or that you have made a consumer debt repayment proposal to the lender. A letter will also appear in front of the number: for example, I2, O2, R2. The letter stands for the type of the credit you are using.

  • "I" means you were given credit on an installment basis, such as for a car loan, where you borrow money once and repay it in fixed amounts, on a regular basis, for a specific period of time until the loan is paid off.
  • "O" means you have open credit such as a line of credit, where you borrow money, as needed, up to a certain limit and the total balance is due at the end of each period. This category may also include student loans, for which the money may not be owed until your schooling is complete.
  • "R" means you have "revolving" credit, where you make regular payments in varying amounts depending on the balance of your account, and can then borrow more money up to your credit limit. Credit cards are a good example of "revolving" credit.1

The most common ratings are "R" ratings. These are known as North American Standard Account Ratings and are the most frequently used. The "R" indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9. The R ratings are a coding system that translates "on time", "one month late", "two months late", etc., into two-digit codes.3

North American Standard Account Ratings

Code

Translation

Other rating indicators that might be found on a report are "I" for installment credit or "O" for open credit line.

Source: Equifax Canada

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.

1 Financial Consumer Agency of Canada Reference 1

2Equifax frequently asked questions Reference 2

Here are Canada's major credit-reporting agencies:

Equifax Canada
Tel: 1-800-465-7166
Fax: 514-355-8502

TransUnion Canada
Tel: 1-866-525-0262 (except in Quebec)
Tel: 1-877-713-3393 (Quebec residents)