If you have ever qualified for a credit card, loan or line of credit, you will have your credit report on file with a credit bureau. Credit bureaus are agencies that maintain and store the data regarding your borrowing and repayment habits in a detailed document, called credit report. This report contains much important information, including your credit history, personal identification, a list of parties authorized by you to access these details and public records with an effect on your credit. This report is designed with the purpose to establish an objective and standardized credit rating for you.
What credit rating means?
Your credit rating is a measure that shows how dependable you are when it comes to paying off your debts. Your credit rating is established by you, not by any financial institution or the government. You can be reported to the credit bureau if you fail to pay back the loan or neglect to pay bills on time. These bureaus are privately organized agencies which supply and exchange the data regarding the way borrowers pay their bills. These details are used to evaluate the credit worthiness of every borrower. Thus, credit can be one of your most valuable personal assets. If you mismanage your credit when you are young, it can have a negative impact on your future financial well-being and ability to borrow.
What is a credit score?
Your credit score is a certain figure that performs your credit risk at a specific time point. The higher your score, the lower the risk for your lender. The credit reporting agencies, like TransUnion and Equifax, use a scale from 300 to 900.
There is also an “R” rating that is included in your credit score. It can range from 1 through 9 and is assigned by the loan lenders on the basis of your credit history. An R9 rating is the worst meaning that you don’t pay your bills on time, while R1 is the best.
There are some major factors which impact your credit score:
- the amount of credit you owe
- credit experience
- payment history
- credit usage
- types of credit established
- acquisition of new credit
How to find out what my credit score is?
You have the right to review the data in your credit bureau file, including your credit rating. You can simply contact one of the credit bureaus in Canada and receive the copy of your report by mail. It is totally free of charge. You can also see your credit report online, but be ready to pay a fee then. If you file a credit request that is denied by the lender based on your rating and you feel that the data is inaccurate, you can request some information to be corrected.
How to establish a high credit rating?
The simplest way to establish a good credit rating is to make payments on time. If you still don’t have a credit card, take out one and use it responsibly. You can develop a good credit history by making minimum payments and this will positively affect you ability to borrow in future.