Many people have never seen one. Your credit report is a little known document that controls much of your fiscal destiny. A detailed picture of your last 7 years. The information in this report is critical to your ability to borrow money, and is a potent piece of paper. So what precisely is in this document and why is it so vital?
Basically, the answer is the credit report tells a lender about who you are, where you reside and how you manage money. If you’ve got a history of abusing creditors, chances are high that you will not find many who will want to be next.
Allow me to start by stating that if you’re concerned about your personal privacy at this point, that ship left a long time back. Once you have credit your life is a public record. Everything you’ve done regarding money, and a creditor of every sort is on this document.
The key aspect of your credit report is your credit score.
This sacred number is commonly called your “Beacon Score”. The Beacon score can range anywhere from 300 to 900. The average Canadian rests around the mid 700s. No-one has a 900 beacon. There’s also info on the reasons for your score. The score may be the first and last thing read by underwriters who will reject it outright based solely on the number. As an example if your beacon score is under 600, you cannot qualify for CMHC insurance, therefore requiring you to put 20% down.
The report gives detailed info, including the date the file was initially established, the last activity, your current and previous addresses, any AKA’s, maiden names, your date of birth, SIN number and employment.
The subsequent section lists the amount of investigations for your credit info.
A warning appears if 3 or more investigations are within 90 days.
Too many inquiries can point to prior refusals, creating more red flags. The following line reports the amount of investigations on your credit in the past 36 months as well. Lenders don’t like to see big numbers here either.
There will be a list of investigations for the last 12 months, including the source of the inquiry. This is crucial for a mortgage company who sees 2 other mortgage company inquiries on the list and may throw up another, you guessed it, red flag.
An outline of the report is provided and is helpful to someone that looks at them all day. Sometimes, if you have lived abroad, there’ll be an indication that a foreign bureau has reported info. There is notice of how much credit you’ve been given and how well you paid your bills. Here will also be an account of your “R” ratings, more on them later on.
Any bankruptcies or collections will be detailed next. Of importance is the date of discharge, sort of bankruptcy (private or business), if your spouse was involved, your liabilities, assets, and the trustee.
Secured loans, chattel mortgages, or registered liens where personal property is staked as collateral are listed in serious detail and include the loan amount and maturity date.
Judgements are court orders against a debtor for payment of monies owing and aren’t something a bank wants to see. A big red flag.
Trades are firms you owe money to. Trade lines are catalogues of multiple corporations. Here the details of the loan are listed. Terms, balances, past due amounts and if they are Open, Revolving, or Installment. Your method of payment is ranked from R0 -too new, authorised, not used, to R9- bad debt, placed for collection, skip,(no run,red flag, red flag)
After all is exposed and your financial soul laid bare, the final section of the credit history is the Consumer Statement Section. This contains statements that you have put on file to explain discrepancies or other comments.
It is highly recommended that you pull your own credit report at least once a year to protect against fraud and wrong info, causing damage to your rating.