Understanding Your Credit Report
Understanding Your Credit Report
When it comes to bad credit car loans, knowing what is on your credit file is critical. Your credit report is a snapshot of your credit history. It is a file recorded and maintained by credit reporting agencies such as Equifax Canada and Trans Union. Your report is created when your borrow money or are issued any type of credit card from banks, credit unions, retailers and finance companies. Among other things, how you repay these loans/cards with these institutions is reported regularly to the credit reporting agencies.
Your Credit Score
Your credit score is a numerical assessment of your financial health. It's a quick way for a lender to assess the risk involved in lending to you. Generally, Canadian credit reporting agencies use a scale of 300-900 where the higher the number the better. The higher your score the less risk the lenders feel you are. That having been said, many lenders employ their own internal scoring systems in addition to that of the credit reporting agencies. These scores play a large role in what interest rate is applied to your loan.
Credit Ratings
When reading your credit file, reporting agencies use various codes to represent the type of credit you have as well as how well you're paying them. Next to each lender's name you will find things such as relevant dates, credit limits, current balances, repayment history and type of credit ie. credit card (represented by the letter "R" for revolving credit where the balance can fluctuate) or installment loan (represented by the letter "I" which are things like car loans). Less common is the "O" rating which is often used regarding student loans which may not be due as yet or sometimes for certain balance-due credit lines.
Here are the primary ratings you will see on your report:
R0 Too new to rate
R1 Paid within 30 days of payment due date or not over one payment past due
R2 Paid more than 30 days from payment due date, or not more than two payments past due
R3 Paid more than 60 days from payment due date, or not more than three payments past due
R4 Paid more than 90 days from payment due date, or four payments past due.
R5 Account is at least 120 days overdue, but not yet rated "9" (see below).
R6 No such rating.
R7 Making regular payments through a special arrangement to settle your debts ie. credit counselling or consumer proposal.
R8 Repossession (voluntary or involuntary return) ie. vehicle loan
R9 Bad debt; written-off account, placed for collection, moved without a new address or bankruptcy.
Depending on the type of trade line (credit type) the letter "R" can be exchanged for an "O" or "I" as explained above.
As you can see, your credit report provides lenders with a substantial amount of information regarding your finances. It's very important to maintain your credit obligations in good standing. If your good rating slips, many things are affected down the line. Take the time to review this credit brochure and good luck!
Get a copy of your credit report here.
Questions and Answers
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