An Introduction To The Canadian Credit System

Credit Score

A credit score represents creditworthiness, or a person’s ability to repay their debts as promised. Having a high credit score is generally understood to be a good thing, as the score is often used as an important factor in deciding whether or not you will be approved for certain loans and the insurance rates available to you.

Introduction to your credit history

Your credit history keeps track of credit cards, phone and internet bills, NSF cheques, and debts sent to collection. In addition, if you’ve ever applied for loans, lenders will ask for a look at your credit report, and these inquiries are recorded. Liens and bankruptcies are also part of the record, as are other relevant legal judgments. General information about you is included as well, such as your SIN, birth date, passport number, and employment information.

Fact: there are 2 main credit bureaus in Ontario, and they all collect your credit information.

Account ratings

Your ability to repay your debts falls under a rating system, which has 9 levels in Canada. They range from no past due payments to basically unavailable for repayment, which happens if you’ve moved without providing creditors with your new address under bankruptcy or have simply been written off as being party to bad debt. From this information, your credit score is generated, and it falls between 300 to 900, with 300 being the lowest score possible, although it is possible to have no credit history.

Tip: One letter generally proceeds your account ratings, and that’s I/O/R, which indicate what kind of lending arrangement has been extended to you (installment, open, or revolving).

Improving your score

There are a number of ways to raise your credit score, and it usually involves time. Begin by paying your bills when they’re sent to you. You may have to start small if you have trouble with even obtaining a credit card. As you gradually build up your credit, your past credit history will slowly be removed, as legislated by each province. It really depends on where you live, but credit history that’s more than 6 or 7 years old will no longer affect your credit score.

The Canadian credit system can become very complex, especially for those who are facing difficulties with repaying creditors. Start by figuring out who to pay first, if you can negotiate better terms, how to structure repayment, and many other decisions are incredibly daunting to do on your own. For help, give us a call or send us an email.

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