Understanding your credit report

Your credit record is basically a report on how you've managed current and past financial obligations. The better your history, the easier it'll be for you to obtain credit. Simply put, your credit record is one of the most important financial tools you have. With a good credit record, buying a new car or home, or applying for a credit card, becomes much easier. Credit records are held by credit-reporting agencies that provide credit reports to financial institutions and other companies that grant credit.

When you apply for credit, it's standard procedure for the credit grantor to first conduct an account inquiry through a credit-reporting agency. Organizations also routinely do account inquiries on their client list in order to monitor client accounts. This second type of inquiry is highly confidential and isn't available to other organizations that may offer you credit.

Most businesses and people you're trying to establish a financial relationship with can request a copy of your credit report, subject to your consent. Creditors, insurance companies, some government agencies, employers and landlords can all request a copy. Of course, you can request a copy, too, as you have a right to your own credit information. In fact, it's recommended you obtain a copy of your credit report every 6 months, so you can ensure all of your information is up-to-date and no fraudulent activity has occurred.

Here are some easy-to-follow guidelines that can help you maintain a good credit report:

• Pay at least the minimum payment due to creditors on time every month
  
• Know the credit limit on all your credit cards, as exceeding limits could affect your credit record
• Don't overextend yourself; the fewer accounts with balances you have, the better your credit record will be
• Don't open up multiple loan accounts or sign up for several credit cards just for the sake of having credit available
• Don't spend income you hope to receive later
• Avoid transferring balances between credit card accounts unless you really are getting a lower interest rate on the account to which you are transferring your balances
• Take advantage of pre-authorized payment plans so you don't forget to make a payment
• Notify creditors when you move so bills arrive on time and you won't miss a payment

If you're having trouble making payments, most creditors will try and help. You can also check out Credit Counselling Canada Opens in a new window..

Credit reporting agencies aren't the ones that grant or deny a credit application. They simply provide the factual credit history information that credit grantors then use to help make their decision. Each credit-granting organization uses different individual criteria for making their decision. In cases where an account or business transaction is joint, both parties are held equally responsible for their credit.

Credit grantors are interested in finding out your credit history, good or bad. Your credit report shows your past and present financial transactions, including debt that has been paid in full.