Today, we’ll be teaching you how to read your credit report. If you haven’t already, download the app and create an account with Borrowell in less than one minute! Once you’ve retrieved your credit report, here’s what you need to know.
Trades and Accounts
On your credit report, you’ll notice a section that describes open and closed accounts. This includes loans, lines of credit, and credit card accounts that you may have. This section is divided based on different kinds of credit:
Revolving: Credit that has a set limit that you may borrow up to, and that is renewed as debt on the account is paid off. Examples include lines of credit or credit cards.
Instalment: Credit in the form of loans that have fixed, scheduled payments over time until the balance is paid off. Examples include car loans and student loans.
Mortgage: Credit that is used to buy a home or other form of real estate. The amount of your mortgage will show on your report, though the mortgage provider will not.
Credit Inquiries
When creditors check your report to determine your creditworthiness, this is known as a “credit inquiry”. There are two different types of credit inquiries:
Hard Inquiries: Checks conducted by banks and lenders that will slightly affect your score and report negatively.
Soft Inquiries: Checking your score or report yourself or through a third-party service, such as Borrowell will not affect your credit score.
It’s important to monitor these inquiries to make sure that you’ve authorized them. A credit inquiry that you don’t recognize could indicate suspicious activity on your file, such as identity theft.
If you identify a concern that involves a theft or crime, report the incident to local police. You can also report scam or fraud to the Canadian Anti-Fraud Centre. Make sure to tell your bank, credit card companies, and credit bureaus (Equifax and Transunion); close any accounts and cards that may have been compromised immediately.
Collections
When payments on credit accounts are long overdue, they may be sent to third-party collections agencies to track down those payments. This will show on your report in the “Collections” section. This section includes information about the specific account, as well as the size of the outstanding balance.
A collections account in your credit report may considerably lower your credit score, so it’s important to pay bills in full and on time. If you have no accounts in collections, this section may be empty.
Legal Items
Legal items are any public record related to your credit, including:
Civil Judgments: Rulings that may be against you in a court of law related to non-criminal charges that usually require fines to be paid.
Tax Liens: Claims on your property placed by the government for late or non-payments of tax liabilities.
These will only show up in this section of your credit report if you have any. Otherwise, this section may be empty.
Bankruptcy: This section of your credit report will show if you’ve filed for bankruptcy or consumer proposal in the past. When you can’t pay your outstanding debts, you file for bankruptcy. Unlike a bankruptcy, a consumer proposal is an agreement where you submit a “proposal” to change how you pay off debt to creditors. Both bankruptcies and consumer proposals may negatively affect your credit report and score.
The Bottom Line
After you get your free credit score and report from Borrowell, make sure you understand the different sections of your report and confirm that the information reported is accurate:
Trades and accounts
Credit inquiries
Collections
Legal items
*All information is taken from Borrowell's website. Check them out here!
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