Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Credit ratings also have the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account.
Your credit report is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. They are notified every time you borrow money or make a payment on a loan or credit card.
What information is found on your credit report?
In addition to credit information, you will also find:
- Liens
- Judgments
- Your address
- Your work history
The accumulation of all of this information is called your credit report.
Why do we use credit scores?
Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about how we choose to live our lives.
The credit score, or beacon score, is a number which gives mortgage lenders an idea of your lending risk. Credit scores range from 300 to 900, the higher your credit score the better. Your credit score will determine the mortgage products and interest rates that you will qualify for.
The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.