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Credit Score Canada - Canada Credit Scores

consumer days person rating

Your credit score says a lot about your financial health. It is your credit history- good and bad – and it lets creditors know how financially healthy you are. Canada credit scores are similar to US credit scores, except that they use two credit agencies instead of three. In Canada, credit scores are reported by Equifax Canada and TransUnion Canada. A credit score in Canada takes into consideration your payment history, the amount(s) you owe, the type of credit, and any new opened credit. It also considers any attempts to open new credit, applications, and credit inquiries that creditors make, as it interprets it as a possible loan.

Lenders use credit scores as a way to know how financially secure you are before approving a loan; it is also a way to estimate delinquency in accounts. Banks, financial institutions, lenders, and others send information on the financial transactions with their customers to credit report agencies. This translates into your credit file, which can be accessed when you apply for a loan or want to borrow money, open a new account or credit card … Canada credit scores go from 300 to 900, the higher the score the better. The lender interprets this number as risk – the highest the number the better it is for the lender as it is likely that you will repay the loan and will not default or make any late payments.

A credit score in Canada also influences the type of interest rate that consumers will be charged. The better the credit score, the better the interest rate will be when borrowing money. Canada credit scores agencies also use a number and a letter in front of it to identify the type of credit and the rating the customer has. The number goes from 0-9 and the letters are I, O, and R.

A number of 1 indicates that the consumer pays within 30 days, and is good; a rating of 9 indicates that the consumer never pays or has a repayment proposal with the lender. The letters stand for revolving credit, such as credit cards®, installment credit, such as a car loan (I), and open lines of credit (O). The letters and numbers are combined, for example R1, means that a consumer pays within 30 days on revolving credit. A number of R0 means that the account is too new or was opened but never used, or has not been used yet. An account that is rate R5 means that is 120 days overdue, R2 is 60 days, R3 is 90 days, and R4 is no more than 120 days overdue. The number six does not exist in this rating. When a consumer is making special payment arrangements such as in debt settlement programs a rating will be 7; repossession is rated as number 8 – this could also be if a person voluntary rendered the goods. A rate of 9 translates into bad debt, not paid, bankruptcy or that the person moved without a new address and payments have not been made.

In sum, a credit score represents a consumer’s credit worthiness expressed in numerical levels and type of credit (letters). This is important for the lender, but also for the consumer, as many doors will close if a consumer has a bad credit rating. It is just financial information on a person.

A person can improve a credit score by making payments of time and by being conscientious of how many credit accounts he/she opens. Many times, there are mistakes in a credit report, which a person can work with the credit agencies to fix. Other consumers hire companies that claim to help consumers fix and improve credit ratings. A person should beware of companies that make unrealistic claims and charge a fee as well. Only creditors are able to change any information on a credit report, by working with the consumer.

Canadians can obtain a free copy of their credit report from each of the two agencies via online application or by contacting them directly.

Credit scores in Canada are similar to scores in the USA, except that the USA uses a third score by a credit agency – Experian.

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