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Hello,
My name is Tom Zielinski, and in this padlet I will go into detail about what a credit rating is, and what goes into evaluating a person's credit rating. Hopefully, by the end of this padlet you will understand more about what a credit rating is, and what affects your credit rating.

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The terms credit rating and credit report can be used interchangeably. These terms represent how financially trust worth the account holder is. The credit score takes the information of the account holder's credit report and then evaluates their risk. There are many factors that are used to calculate a persons credit score, such as:
- Duration of credit.
- If a balance is present on a credit card.
- Missed payments.
- Outstanding debts.
- Number of credit card applications.
- Type of credit card.
- Debts sent to collection agencies.
- Record of bankruptcy.
There are two main credit bureaus located in Canada, Equifax and TransUnion. These bureaus are private companies that record information on how everyone uses their credit card.
I chose this site because it gives a lot of examples that can affect a person’s credit score, these examples aren’t very descriptive but they show you the many different ways you can be affected.

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Your credit report

Your credit report is a summary of your credit history.

Your credit report is created when you borrow money or apply for credit for the first time. Lenders send information about your accounts to the credit bureaus, also known as credit reporting agencies.

Your credit score

Your credit score is a three-digit number that comes from the information in your credit report. It shows how well you manage credit and how risky it would be for a lender to lend you money.

Your credit score is calculated using a formula based on your credit report.

Note that you:

get points if you use your credit responsibly

lose points if you have trouble managing your credit

Your credit score will change over time as your credit report is updated.

How a credit score is calculated

It's impossible to know exactly how much your credit score will change based on the actions you take. Credit bureaus and lenders don't share the actual formulas they use to calculate credit scores.

Factors that may affect your credit score include:

how long you've had credit

how long each credit has been in your report

if you carry a balance on your credit cards

if you regularly miss payments

the amount of your outstanding debts

being close to, at or above your credit limit

the number of recent credit applications

the type of credit you're using

if your debts have been sent to a collection agency

any record of insolvency or bankruptcy

Lenders set their own guidelines on the minimum credit score you need for them to lend you money.

If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may be different from the score produced for a lender. This is because a lender may give more weight to certain information when calculating your credit score.

Who creates your credit report and credit score

There are two main credit bureaus in Canada:

These are private companies that collect, store and share information about how you use credit.

Equifax and TransUnion only collect information from creditors about your financial experiences in Canada.

Some financial institutions may be willing to recognize a credit history outside Canada if you ask them. This may involve extra steps. For example, you may request a copy of your credit report in the other country and meet with your local branch officer.

Who can see and use your credit report

Credit bureaus follow rules that define who can see your credit report and how they can use it.

Those allowed to see your credit report include:

banks, credit unions and other financial institutions

credit card companies

car leasing companies

retailers

mobile phone companies

insurance companies

governments

employers

landlords

These businesses or individuals use your credit report to help them make decisions about you.

These decisions could be to:

lend you money

collect a debt

consider you for rental housing

consider you for a job

provide you with insurance

offer you a promotion

offer you a credit increase

A lender or other organization may ask to "check your credit" or "pull your report". When they do so, they are asking to access your credit report at the credit bureau. This results in an inquiry in your credit report.

Lenders may be concerned if there are too many credit checks, or inquiries in your credit report.

It can seem like you're:

urgently seeking credit

trying to live beyond your means

Consent and credit checks

In general, you need to give permission, or your consent, for a business or individual to use your credit report.

In the following provinces a business or individual only needs to tell you that they are checking your credit report:

Nova Scotia

Prince Edward Island

Saskatchewan

Other provinces require written consent to check your credit report. When you sign an application for credit, you allow the lender to access your credit report. Your consent generally lets the lender use your credit report when you first apply for credit. They can also access your credit at any time afterward while your account is open.

In many cases, your consent also lets the lender share information about you with the credit bureaus. This is only the case if the lender approves your application.

Some provincial laws allow government representatives to see parts of your credit report without your consent. This includes judges and police.
Contact your provincial or territorial consumer affairs office for information on laws related to credit reporting.
What's included in your credit report

Your credit report contains personal, financial and credit history information. In general, it takes 30 to 90 days for information to be updated in your credit report.

Personal information in your credit report

Your credit report may contain your:

name

date of birth

current and previous addresses

current and previous telephone numbers

social insurance number

driver's licence number

passport number

current and previous employers

current and previous job titles

Financial information in your credit report

Your credit report may contain:

non-sufficient funds payments, or bad cheques

chequing and savings accounts closed "for cause" due to money owing or fraud committed

credit you use including credit cards, retail or store cards, lines of credit and loans

bankruptcy or a court decision against you that relates to credit

debts sent to collection agencies

inquiries from lenders and others who have requested your credit report in the past three years

registered items, such as a car lien, that allows the lender to seize it if you don't pay

remarks including consumer statements, fraud alerts and identity verification alerts

Your credit report contains factual information about your credit cards and loans, such as:

when you opened your account

how much you owe

if you make your payments on time

if you miss payments

if your debt has been transferred to a collection agency

if you go over your credit limit

personal information that is available in public records, such as a bankruptcy

Your credit report can also include chequing and savings accounts that are closed "for cause". These include accounts closed due to money owing or fraud committed by the account holder.

Other accounts included in a credit report

Your mobile phone and internet provider may report your accounts to your credit bureau. They can appear in your credit report, even though they aren't credit accounts.

Your mortgage information and your mortgage payment history may also appear in your credit report. The credit bureaus decides if they use this information when they determine your credit score

A home equity line of credit ( HELOC) that is added to your mortgage may be treated as part of your mortgage in your credit report. If your HELOC is a separate account from your mortgage, it is reported separately.

Why your credit history matters

It can affect your finances

Financial institutions look at your credit report and credit score to decide if they will lend you money. They also use them to determine how much interest they will charge you to borrow money.

If you have no credit history or a poor credit history, it could be harder for you to get a credit card, loan or mortgage. It could even affect your ability to rent a house or apartment or get hired for a job.

If you have good credit history, you may be able to get a lower interest rate on loans. This can save you a lot of money over time.

It can show signs of identity theft

You can also use your credit report to check for signs of identity theft. This is something you should do at least once a year for both credit bureaus. Look to make sure someone has not tried to open credit cards or other loans in your name.

Related links

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credit report; credit score; what is a credit report; what is a credit score; credit bureaus; credit check; credit checks; credit history; credit score check; credit reporting agencies; credit report check; credit agenies

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Who creates your credit report, who can see it and what it includes.

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What affects credit score? This article goes into detail about the 5 main factors that influence a credit score. These factors include: 35% of your credit history is based on your payment history. 30% of your credit history is based on your credit utilization, so the amount of credit you use is based on the limit of your card. 15% of your credit history is based on the length of your credit history, the longer the better. 10% of your credit history is based on hard credit checks, which occur when a person applies for a credit card or loan. 10% of your credit history is based on the diversity of your credit card history, which shows that the account holder can responsibly pay off their card.
I chose this website because it gave the most descriptive and easy-to-understand answers. Followed by many examples of real-world situations that people can find themselves in.

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This video does a great job of explaining what the 5 major factors are that affect people’s credit scores. These factors are payment history, credit utilization, credit history, credit inquiries, and types of credit. It also shares examples and situations that everyday people can encounter, while also going into detail about how to earn and maintain a good credit score.

The reason I chose this video is that I genuinely related to the tips the creator gave its users to maintain a good credit score, by providing an example of what someone should do in a real-world situation.

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This image shows the main 5 factors that affect a persons credit score as a pie graph. I chose this image because it give you a concise visual on what affects your credit score the most.

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This video goes into the small and large mistakes that can ruin your credit score. he goes into detail about these 5 points, Do not make payments later than 30 days. Do not use all the credit you have available on your credit card. Do not apply for multiple credit cards too quickly. Do not close old credit lines. Finally, not having a credit history. All of these are common mistakes regular people can make, without thinking very much of them.
I chose this video because of how well the creator gets the point across that certain things can ruin your credit score. He also does this in a very personable way that I think many people could relate to, and learn from.

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Before I took on this topic I wasn't really certain what the main things that affected a persons credit score, only the basic everyone should use their credit card to make small purchases to gain credit score. Everything after that was pretty new to me. What surprised me most is just how many things can negatively affect your credit score. I am very thankful that I did my research assignment on this topic because it will be very useful for my future.

This assignment really opened my eyes to how I should be using my credit card, and the actions I should take to make my credit score the best it can be. I'm hoping to make a down payment on a house within the next 4 years, so making sure I have an excellent credit score will be critical, in the way I can buy a house.

I think the most important thing about credit scored, are the things that can negatively affect a persons credit scores, most of these things aren't common sense, and people usually unknowingly make these mistakes, so knowing about them would be very helpful to a lot of people. I know that I have made a few of these mistakes in the last few years, so I know it would be helpful to someone to know that they, should not max out their credit card or that they should use credit when doing basic shopping, because it will be the easiest to pay off.

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In this video, It explains how there isn't just one way of determining someone's credit score, and that there are many factors that are in play when the bureaus determine someone's credit score at that particular time because a credit report displays the individual's credit at that point in time. It is also said that credit scores may vary depending on the credit score provider, model, and target industry. And that even a low credit score can be fixed with good habits and the right tools.
I chose this video because tells you all the key information about a credit score and how it is calculated based on different scenarios, in an efficient way.

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There are many factors that go into calculating a credit score, however, after researching this article, I found it to be far more beneficial to explain the negative factors that affect people's credit score. 1. One of the biggest causes of people losing a point on their credit score are simple reporting error. These errors can be from credit card theft, late payments that were late, and files that do not belong to the account holder.
2. Moving frequently can lower an individual's credit score because requesting a credit check slightly lowers your credit score, so it is important to not move houses often.
3. Not having a stable source of income will lower your credit score because you are not seen as a low-risk borrower.
4. Not having a mortgage in your name can reduce your credit score because your housing is unknown making it seem like you are a risk, even if you own your own home.
5. Not having a history of debt will reduce your credit score, because your history is valuable to determine how well you pay off loans.
I chose this article because it showed the most facts about what affects a credit score. It also went into a lot of detail about the factors that positively and negatively affect a person's credit score.

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We have collected information from both of the consumer reporting agencies (credit bureaus), as well as our own research to provide a full picture on credit files and credit scores, including those little known "insider" secrets.

Topics at a glance:

1. What information is kept on my credit file?

2. How long is information kept on my file?

3. What is a credit "score"?

4. How can my credit score affect my life?

5. What factors affect my credit score?

6. How do I raise my credit score?

What information is kept in my credit file?

Your credit file contains information on all of your credit accounts submitted to the credit bureaus, including balances, limits, payment history, etc, as well as identification information such as your name, address, age, social insurance number, marital status, spouse's name and age, number of dependents, occupation, and employment history.

How long is information kept on my credit file?

Actual inquiries made by credit grantors

minimum of 3 years

Credit history and banking information

6 years from the last activity date

Bankruptcies

6 years from the date of discharge (1st bankruptcy)

Judgments, foreclosures, garnishments

6 years from the date filed

Collections

6 years from the date of last activity

Secured loans

6 years from the date filed

Credit Counseling, Consumer Proposals to creditors,

Orderly Payment of Debt (OPD), Voluntary Deposit information

3 years from the date settled or completed

What is a credit score?

In Canada, credit scores range from 300 (just getting started) up to 900 points, which is the best score. According to TransUnion, 650 is the magic middle number - a score above 650 will likely qualify you for a standard loan while a score under 650 will likely bring difficulty in receiving new credit.

Lenders who pull your credit bureau file may see a slightly different number than you see when you pull your own file. This is due to the fact that each creditor applies a specific set of risk rules, giving and taking points for different purposes or preferences. This proprietary method of scoring will make a difference in the final calculation. The score you pull for yourself is calculated using an algorithm created for consumers that approximates these different formulas, and should still be in the same numerical range as the lenders' scores.

Order your credit report from both credit reporting agencies in Canada - Equifax and TransUnion - at least once per year for free (when requested by mail, fax, telephone, or in person), and you can pay to see your credit score if you choose.

How can a low credit rating affect my life?

Credit scoring is used by lenders, insurers, landlords, employers, and utility companies to evaluate your credit behaviour and assess your creditworthiness.

1. Applying for a loan. Your credit score will be a big factor into the decision of whether you are approved or denied your application for more credit. Your credit score will also affect the interest rate and credit limit offered to you by the new credit grantor - the lower your credit score, the higher the interest rate will be and the lower the credit limit offered - the reason for this is you are considered more of a credit risk.

2. Applying for a job. A potential employer may ask your permission to check your credit file and based on what they read, they may decide not to hire you due to your poor credit history. Yes, having bad credit could cost you a job!

3. Renting a vehicle. When you sign an application to rent a car, the rental company can check your credit history to determine what their risk may be when they loan you their property. So although you are not applying for credit, the application documents you sign provide your written permission to access your credit information.

4. The same is true when applying for rental housing - the landlord may assess your tenant worthiness and their risk by factoring in your credit rating and score, and they could pass you over for someone with a better credit rating.

What information is used to calculate my credit score, and what factors will lower my score?

If you have tried looking on the consumer reporting agencies' (CRAs, also know as Credit Bureaus) websites, you have seen they provide VERY little information as to how your credit score is calculated. They believe this information is proprietary and therefore their "secret". They do, however, provide a list of the main factors which affect your credit score:

1. Payment History
Equifax says: "Pay all of your bills on time. Paying late, or having your account sent to a collection agency has a negative impact on your credit score."
TransUnion says: "A good record of on-time payments will help boost your credit score."

2. Delinquencies
Equifax lists: "Serious delinquency; Serious delinquency, and public record or collection field; Time since delinquency is too recent or unknown; Level of delinquency on accounts is too high; Number of accounts with delinquency is too high"
TransUnion lists: "Severity and frequency of derogatory credit information such as bankruptcies, charge-offs, and collections"

3. Balance-to-Limit Ratio
Equifax says: "Try not to run your balances up to your credit limit. Keeping your account balances below 75% of your available credit may also help your score."
TransUnion says: "Balances above 50 percent of your credit limits will harm your credit. Aim for balances under 30 percent."

Ok, so avoid maxing out your credit - because if you don't really need more credit you'll be able to get it, and if you do really need it then you are more of a risk.(Funny how that works)

4. Recent Inquiries
Equifax says: "Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can sometimes be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties, or overextending yourself by taking on more debt than you can actually repay. A flurry of inquiries will prompt most lenders to ask you why."
TransUnion says: "Avoid excessive inquiries. When a lender or business checks your credit, it causes a hard inquiry to your credit file. Apply for new credit in moderation."

There are two types of Credit Bureau file inquires: "hard inquiries" such as an application for new credit, which will lower your score; and "soft inquiries" such as requesting your own credit report, and businesses checking your file for updates to your existing credit accounts for approving credit limit increases, for example - these will not appear on your file or lower your credit score.

Although a "flurry of inquiries" may indicate financial difficulties, it could also be that you are moving to a new city, and will need to apply for a new mortgage, a new electric/gas account, cable, phone and other utilities accounts. These "inquiries" into your account will deduct points from your score, so you may take a rather large hit (points wise) on your credit rating for moving houses.

Also of concern is that inquiries for non-credit purposes (such as utility companies and car rentals), will cause your credit score to drop without adding points for having credit in good standing, as with a credit card that you pay off every month. So be careful to only apply for credit you really need.

5. Length/history of Accounts
Equifax says: A "common negative score factor... [is the] length of time accounts has been established is too short"
TransUnion says: An established credit history makes you a less risky borrower. Think twice before closing old accounts before a loan application."

Having a longer history on your credit accounts earns you more points, so avoid closing your accounts if you may need them in the future. A good credit history is built over time - sorry, but there is no quick fix for this one.

6. Variety of Credit Accounts
TransUnion says: "A healthy credit profile has a balanced mix of credit accounts and loans."

Having a mix of credit products (credit card, retail store card, line of credit, car loan, etc) will procure more points on your file than having only one type of credit, such as only credit cards.

7. Too many accounts
Having a lot credit accounts, especially if many of them carry balances, is another warning sign of financial distress, so if the Credit Bureaus think you have too many, they will deduct points.

Other "derogatory" factors which negatively affect your credit rating and the Credit Bureaus don't like to mention to you are:

1. Errors
One of the major causes of point loss to your credit rating are bureau reporting errors. (They can also cost you financially as shown in the CBC report on credit reporting mistakes) Errors can be delinquent accounts reporting on your file that do not belong to you, late payments that were not late, and credit that is created from identity fraud - therefore not your credit. The Credit Bureaus are paid by the creditors who pull credit bureau files and in turn who report to them. Credit reporting is done electronically, and Credit Bureaus accept the information they are sent without any investigation into the accuracy of the information. Therefore, is it critical that you pull your credit bureau file at least once every year. Only you will know when there is an error on your file, and it is up to you to have the credit bureaus fix it.

Order your file here: TransUnion and Equifax

Look for these common errors:

Wrong mailing addresses

Incorrect Social Insurance Number

Signs of identity theft

Errors in your credit accounts

Late payments

Unauthorized hard inquiries

If there is an error on your file you must contact the Credit Bureau, then it is up to the Bureau to investigate your complaint and to verify the information contained in your file by contacting the reporting creditor. When contacted by the Credit Bureau, the reporting creditor will have to verify the item they have placed on your file. You are entitled to be part of that process.

Check your credit again 30-60 days after disputing errors. If any of the disputed inaccuracies remain, contact the creditor to further your dispute and determine if the item can be taken off your credit profile. If you want to tell your side of the story, forward a written request to the credit reporting agency to have a consumer statement added to your credit file.

2. Moving/Time at Address
As previously discussed, a large number of credit file requests within a short period due to moving will lower your credit score. But on top of that, the length of time at your current address will influence your score, so try not to move a lot as it will affect your credit rating. The longer you remain at one address, the more points you receive.

3. Changing jobs/employers frequently
The longer you stay at a job, the higher points your credit score receives. You are seen as having a secure job and therefore being a secure, less risky credit consumer.

4. Having no mortgage, or no housing information on your file
The Credit Bureaus assign certain points for those who have mortgages and those who rent, and deduct points for those whose housing situation is unknown to them. As soon as you pay off your mortgage, the reporting account is removed from your file and you are in the unknown category, which will actually remove points from your credit rating! Credit card and other credit account history will remain on your account even after being paid off and closed, but unfortunately a paid mortgage does not benefit your credit rating. Imagine, you own your own home and that does not benefit your credit rating - does that even make sense? Also, not all mortgages report to the Credit Bureaus.

5. Having high revolving credit balances
When you have high balances that are rotating between different credit accounts, this is a warning sign that you could be in financial trouble and therefore you could be considered a credit risk.

6. Having no debt
Believe it or not, having no debt is bad for your credit score! Here we go again - if you don't need to borrow money creditors will be trying to throw it at you. If you do need to borrow money and have no debt or debt history well, you will have a harder time of it. If you do not have a history of credit use on your file to provide something for creditors to evaluate, they will see that as a risk, and you will be deducted points on your score for not having credit accounts.

Raise your credit score:

1. Correct errors, and track your report for future errors. Order your credit file from each bureau at least once per year.

2. Lower your balances. If your debt levels are above 50% of your available limit, create a payment plan to reduce your balances.

3. The biggest "tip" to having a good credit rating and a high credit score is to continually use credit and to repay that credit on time all the time. Set up automated payments to help with this.

4. If you have no credit history, or need to rebuild your credit, open a secured credit card account. You pay a deposit, which sets the limit of your card, then use it like a regular credit card. The secured credit card provider reports your payment habits to the credit bureau(s), so you will be able to gain points with an account in good standing. Choose from a Home Trust Secured VISA.

5. Look over our list, read your credit report, and identify any areas that could be improved for a higher credit rating.

Remember, "your credit rating is not a reflection of your personal worth - it is merely a credit reporting tool" - Margaret H. Johnson. The good news is your credit rating is like your self-esteem, sometimes in your life it will be high and sometimes it will be low - however, you can always rebuild it over time!

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We have collected information from both of the consumer reporting agencies (credit bureaus), as well as our own research to provide a full picture on credit files and credit scores, including those little known "insider" secrets. What information is kept on my credit file? How long is information kept on my file?

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This video goes in depth about the “truths” about credit scores, as well as the common misconceptions that some people have regarding them. One of the biggest misconceptions is that applying for a credit card for rewards is a good idea, and using a free credit score app is a good idea. It also goes in depth about the factors that affect credit score. The reason I chose this video is because this video does one of the best jobs at explaining the entire concept of what a credit score is, and also because it does a great job at explaining things that seem fine, but could actually negatively impact your credit score.

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This image clearly depicts the ranges of credit ratings that are bad, fair, good, and excellent. I chose this image because it is very concise and clearly displays all the information it needs in a simple manner.