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How to Read Your Credit Report

Your credit report may look complicated the first time you see it – but don’t worry. It’s really an easy-to-understand document – once you’ve read through it. On the following pages, we’ll explain each credit report section – and highlight areas that you should watch on your own credit report. Most credit reports, like the example we have below from TransUnion – one of the largest credit bureaus in Canada, break your information into easy to digest sections.

Section 1, “Accounts Summary” includes the following key statistics:

  • “Credit Score” which is a number on a scale from 300 – 900 that a credit bureau calculates primarily based on the value and number of credit cards and loans you have, and your repayment history. In general, a high credit score means that lenders are likely to approve your application for a credit card, credit limit increase or new loan. Visit our credit score explanation page for more information.
  • “Balances” is the total of everything you owe on your credit cards and loans that lenders reported to the credit bureau. Manage your ‘balances’ carefully if you want an additional loan, credit card or credit limit increase. Lenders compare your income with the amount you already owe to decide if you can handle more debt.
  • “Payments” includes all the minimum monthly payments you owe across all your reported loans and credit cards
  • “Delinquent” refers to the number of times over the past six years that you did not make the required monthly payment on a loan or credit card on time. Don’t worry if you occasionally forget to pay your bill - just don’t make it a habit. To reduce any credit score damage, pay your bill as soon as you realize you missed the due date. Call the lender and explain that you missed the due date by accident. Often, lenders will forgive interest charges when you make an honest mistake. But if you miss the payment due date too often, you will see a drop in your credit score, and your lender will charge you added interest, penalties and may even suspend your account.
  • “Inquiries (6 years)” is the number of times organizations requested your credit information from this credit bureau, typically because you applied for a new credit card, loan or credit limit increase. Too many inquiries over a brief period can be a concern for lenders, since it may show that you urgently need credit. Many inquiries do not count in your credit score calculation, including checking your own credit report.
  • “Credit Accounts” is the number of credit card or loan accounts that the credit bureau has on file, whether they’re open or closed. While lenders are interested in the number of accounts you have, they care much more about how you manage and repay debts for open accounts.
  • “Open Accounts” is the number of active credit card or loan accounts you have that lenders report to the credit bureau. Too many open accounts are a concern for lenders, who wonder about your ability to manage and pay off all your debt.
  • “Closed Accounts” are not always relevant, but shows accounts you had at one-time, which lenders reported to the credit bureau as closed.
  • “Derogatory” is the next step after “Delinquent” and refers to the number of times over the past six years that your account was seriously overdue. In fact, when a lender classifies your account derogatory, all your lenders become concerned that you may never pay your loan or credit card balances. At this point, lenders may turn to the courts to help them collect on your debt. Any derogatory accounts harm your credit rating. Most lenders will not approve your new loan or credit card application with derogatory accounts on your file, and those that do, will charge a higher interest rate and offer a smaller credit limit. Derogatory items can also include bankruptcies, and accounts where you’ve settled with a lender for less than the full amount owing.
  • “Public Records” are what the name suggests -- information about you that is available to the public such as a bankruptcy, court judgment against you and municipal, provincial or federal tax claims, amounts owing or liens. These types of public records reduce your credit score because they are proof that you were unable to pay a debt in the past. By law you must pay your outstanding taxes before you repay a credit card or loan balance.

Section 2, Personal Information may not need much explanation, although you do want to keep your Personal Information up to date. Just make sure that all the companies that report to the credit bureau have your current information. You can also contact the credit bureau to make changes. Several of the categories may seem a little unusual, such as “also known as.” An example of also known as might be an actor who has a stage name but uses their real name for loans and credit cards.

The “Consumer Statement” is a written explanation that you write, upload and attach to your credit report to explain any circumstances that caused your credit report to change. Usually, people attach a consumer statement to offer a reasonable explanation for an unusual pattern of missed or overdue payments. For example, you will want a lender to know if you were unexpectedly in the hospital for a few weeks and were unable to pay your debts, especially if you’re all caught up now. Or that someone stole your identity and took out loans in your name. Or that you have a legitimate disagreement with a business, and that’s why you’re not paying your bill yet.

Section 3, Inquiries are a list of potential lenders, credit card companies and others who “inquired” about your credit history and score. These inquiries are known as “Hard Inquiries” because they come from firms that are trying to decide if they want to offer you a loan, credit card or mortgage. Not all inquiries count towards your credit score. For example, ‘Soft Inquiries” like when you request your own credit report or when a company checks if they can pre-approve you for an offer do not matter.

Section 4, “Banking Information” lists bank accounts that a bank closed for derogatory reasons. This section is often “not applicable.” Examples of when a bank account may be “derogatory” include when an account is always in overdraft, has outstanding fees, or has too many returned (NSF) cheques.

Section 5, “Accounts” is a list of all the accounts that credit card companies, banks and other lenders report to this credit bureau. Revolving Accounts typically refer to credit cards and lines of credit that allow you to use the funds, up to the credit limit, whenever and however you like, provided you pay the monthly balance due, on time. Installment Accounts include mortgages and other loans, like car loans, where you make a regular payment on a weekly, or monthly basis to pay the loan and interest. The third category, Other Accounts include charge cards and phone bills where a company offers you credit, but not on an installment or revolving credit basis. For example, with a charge card, you must pay the entire balance by the due date.

Section 6, Public Records are often blank. Unless someone has sued you, you owe on your taxes, or you declare bankruptcy, most people do not have any public record information