Whether you like it or not, today more than ever our lives revolve around credit reports and scores. If you’re like many Canadians, you may not know what’s on your credit report or what your credit score is. What’s the difference between them?
Your Credit Report
A Canadian credit report is a detailed listing of all your personal and financial information. It’s a snapshot of your situation at the moment you request the report. Your credit report includes:
- your name
- your social insurance number
- your date of birth
- your current and previous address with the date reported
- your current and previous employer plus occupation with the date reported
- credit information on each account opened (purged 6 years from date of last activity)
- credit history and banking information (purged 6 years from date of last activity)
- public records and other information like bankruptcy, wage garnishments, etc (purged 6 years from date of last activity except consumer proposals which get purged after 3 years and secured loans after 7 to 10 years in PEI, 6 years everywhere else)
- collection accounts (purged 6 years from date of last activity)
- credit inquiries (purged 3 years after last inquiry)
Your FICO® Credit Score from Equifax Canada
The only credit score you should be concerned with is your FICO® credit score. It’s a number between 300 and 900 based on a statistical analysis of a person’s credit files, to represent your creditworthiness. The higher the number, the more favourably lenders look at you in terms of credit risk. This can mean the difference between being approved or denied credit as well as the interest rate you’ll be charged if approved.
The FICO credit scoring system was developed by Fair, Isaac and Company and is used in many countries around the world. Although the company was founded in 1956, the use of their credit scoring model did not really gain mainstream use in Canada until the 1990s and especially in the early 2000s. Today, it is very commonly used for things like approval for insurance, what interest rate you’ll be charged if approved for credit and even making employee hiring decisions. To say that having a good FICO score is important these days would be an understatement.
The exact method of calculating a FICO credit score is kept confidential, although it’s no secret that factors like late payments, high credit card balances and collection accounts will lower a score. Some lenders and credit issuers will look solely at your FICO credit score when you apply for credit. Others take into account the rest of information on credit report, especially when it’s manually reviewed.
When you purchase your credit score from Equifax Canada, it will show up as a FICO score, but you may also hear it being being referred to as a “BEACON® Score.” It’s a slightly outdated name. That’s Equifax’s version of the FICO® score, so it’s fine. You should not settle for ANY other credit scores. FICO is the industry standard that most lenders in Canada use.
Credit Reports and Scores from TransUnion Canada
TransUnion Canada does not use or sell a FICO score. They say this in the fine print on their website. It states:
TransUnion is not connected in any way with Fair, Isaac and Company; the credit score provided here is not a so-called FICO score. The credit scores of TransUnion may not be identical in every respect to any consumer credit scores produced by any other company.
Equifax vs TransUnion Canada
If mortgage brokers, credit issuers, lenders and credit card companies are being honest with you, they’ll tell you that the FICO score and credit report from Equifax Canada are the most commonly used and trusted. In fact, some lenders and credit issuers don’t even use TransUnion at all. If they do, it’s more of a secondary source to back up any information in question. You probably won’t find many Canadian businesses that rely solely on TransUnion. Even still, it’s important to make sure that your credit report from TransUnion is accurate, which will in turn raise your credit score with them.
Only Buy A FICO Credit Score – The Others Are Fakes!
It’s not worth buying any other credit scores or reports. If you see an advertisement for a credit score – especially online – and it doesn’t say it’s a FICO score, then it’s NOT a FICO score. It’s a fake score. Worse yet, you may unknowingly get subscribed to a monthly plan for identity theft insurance or some other program they offer. It’s buried in the fine print, but most people assume it’s just a standard contract and don’t bother to read the fine print. You should really just be concerned with Equifax and to a lesser degree, TransUnion. If you had to pick just one company, keep tabs on your Equifax credit report and FICO score from them.
Score Power is a great product from Equifax Canada. It’s the only one that gives you access to your true FICO credit score and your personalized Equifax credit report. It will even show you how you rank compared to the rest of the Canadian population with consumer credit files. Score Power currently sells for $23.95 and is available for instant download from their website. If you just want to see your credit report, without the FICO credit score, that currents sells for $15.50 and is also available for instant download. You might as well pay the extra $8.45 and get Score Power. That way you get the FICO credit score, which is not available on its own. Plus, you can print out your Equifax credit report with your FICO score and compare them from month to month. If you notice any changes in your score, look carefully through the rest of your credit report, comparing with a previous one, and see what triggered the change – whether it be a good one or a bad one.
How often should you check your credit report and score?
Many experts recommend that you see what’s in your credit report at least once a year. Sadly, many Canadians do not do this, or even know they are able to. When you’re recovering from a bankruptcy in Canada, it’s crucial to know what’s on your credit report and what your credit score is. If fact, you may want to check it more frequently than just once every 12 months – especially in the beginning when you are first cleaning up your credit report and building up your FICO credit score. Then you may want to subscribe to the credit monitoring services from Equifax and TransUnion. They each charge $14.95 per month for this service.
You can order online right from the Equifax and TransUnion websites with a credit card (which you probably don’t have if you were just discharged from a bankruptcy in Canada). If you don’t know anyone who could order them for you with his or her credit card, or money is a bit too tight right now, then you can request your free credit report by mail that will be sent through Canada Post. However, the free credit reports they send out by mail won’t show your FICO credit score.
A high percentage of Canadians’ credit profiles contain at least some, if not many inaccuracies and errors. It’s up to you to find them and have them corrected. You may find that your credit scores jump quickly once you do. It’s the difference between good credit and bad credit, even if a bankruptcy is still showing.
Remember, it costs money to get your FICO credit score, but it’s worth it. Especially for us ex-bankrupt folks. We need all the help we can get!
If you purchase your credit reports and scores online, the same version or “snapshot” will be available to you for 30 days from the date of purchase. Although things could change and get updated during that 30 days, you won’t see them because the report doesn’t change. After 30 days, you’ll need to once again buy your credit report and score.
Keep track of your credit reports and credit score
Now that you know the difference between a credit report and a credit score, make sure you watch them and immediately get any and all errors corrected. As an ex-bankrupt Canadian, you need to be even more vigilant with keeping track of your credit reports and scores. Once you know how to check them, the next step is to improve them. Watch for an article on that coming soon.
The worst thing to do is just to sit back and do nothing in this credit-dependent world we live in. You may hear common myths stating that your credit is ruined for 7 years after filing for bankruptcy. Unfortunately, many Canadians believe that and put anything to do with credit at the back of their minds. Don’t be like them! After reading and understanding this article, you’re now more educated on credit reports and scores than majority of Canadians.