How to Read and Understand Your Credit Report

Why Understanding Your Credit Report Matters 

Your credit report provides a comprehensive view of your financial history. You might see regular mortgage payments, car loan payments, and even a record of your first credit card. But what do those accounts, inquiries, and public records mean? How does all this affect your credit score?

Around half of Canadians are unsure of how their credit score is calculated. Millions of people are making financial decisions, like applying for mortgages or credit cards, without knowing what lenders actually see during an application review. 

Understanding the facts about your credit report is more than just knowing a number. It's a detailed record of your financial history that gives you the power to spot errors, catch fraud early, and even improve your current financial standing by making informed changes in how you use credit.

*Note: Some of the images used below were taken from an Equifax credit report and are only meant to be used as helpful examples. Yours might look slightly different if you obtain your report from TransUnion.

What is a Credit Report?

A credit report is a statement about your loan history, credit activity, and credit account status. It acts as your financial report card for creditworthiness and debt management only, as credit reports don't include details on personal investments, savings, income, net worth, etc. 

Lenders can access your credit report to help them decide whether you’re reliable enough to lend to. Potential employers and landlords may also access your credit report if given permission.

What Information Does Your Credit Report Include?

Your credit report contains the following insights into your historical and current credit scenario.

Personal Information

Credit bureaus have personal details such as your phone number, email addresses, reported addresses, birthdate, and full name. All this shows up on your credit report. 

Accounts and Payment History 

Accounts include personal loans, lines of credit, mortgage loans, credit cards, and other credit accounts that require a credit check. 

Most payday lenders and Buy Now, Pay Later (BNPL) providers do not report regular payment activity to the credit bureaus. As a result, these accounts typically don’t appear on your credit report or help build credit — unless the debt is sent to a collection agency, in which case it can be reported and negatively affect your credit.

You’ll probably see the most accounts under the “Revolving Credit” section. These accounts have a limit and a minimum payment. If you’re late on your credit card payment, you’ll see it here.

Public Records and Collections 

Public records are credit-related legal matters viewable by the public. We’re talking: 

• Bankruptcy: A legal process in which someone seeks complete relief from every debt at the expense of a damaged credit score. A bankruptcy stays on file for six to seven years.
• Liens: A lender’s legal claim on something in your possession (car, real estate property) if you default on a loan. Some liens remain in place until the balance is paid or through a court order.
• Collections: Any debts that went unpaid long enough for a lender to send it to a collections agency. Negative information made on credit cards or loans can stay on your file for six years.
• Judgments: A legal decision by the courts demanding you repay a debt. Judgments stay on your file for six to seven years in most provinces, and can last up to 10 years in Prince Edward Island (PEI). 

Most of these items will stay on your credit report for a minimum of six years. Fortunately, collections entries are automatically removed from your credit report once they expire after six years.

A pre-approval or personal inquiry won’t affect your credit score. These are called soft inquiries. 

What about a lender assessing your creditworthiness for a mortgage or car loan? That’s a hard inquiry, and it would slightly affect your credit. Too many hard inquiries can lower your score. 

If you’re wondering what will impact your credit score, Equifax makes it simple by including a “May Affect Scores” column that indicates whether each inquiry affects your score. 

How to Read and Interpret Each Section 

Reading a credit report becomes easier once you understand how it’s written.  Let's break down what you're actually looking at.

Understanding Account Codes and Ratings 

Each credit account on your report has a code that tells lenders how you've managed it. The most common system uses a letter-number combination:

Letter Codes:

• R = Revolving credit (credit cards, lines of credit)
• I = Installment loans (car loans, personal loans with fixed payments)
• O = Open credit (balance must be paid in full each month)
• M = Mortgage

Number Codes (0-9):

• R1/I1 = Paid on time, every time
• R2/I2 = Paid within 30 days of due date
• R3/I3 = Paid within 60 days of due date 
• R4/I4 = Paid within 90 days of due date 
• R5/I5 = Paid more than 120 days late 
• R7/I7 = Regular payments through debt consolidation or consumer proposal
• R9/I9 = Placed for collection, or bankruptcy 

The most common mistake Canadians make when reading their credit report is avoiding looking at negative information, but this isn’t the solution for fixing credit issues. Taking proactive steps, like working with a certified Credit Counsellor or arranging a payment plan with your lender, can gradually repair your credit. 

Spotting Errors or Suspicious Activity 

Mistakes happen more often than you'd think. Common errors to watch for include:

• Accounts that don't belong to you, which may indicate identity theft
• Incorrect personal information, like a wrong address or a misspelled name 
• Duplicate accounts showing the same debt twice
• Closed accounts still showing as open
• Incorrect payment status or late payments you made on time
• Debts you already paid off still show a balance
• Hard inquiries you didn't authorize

Understanding Equifax vs. TransUnion Reports

Canada’s two credit bureaus are Equifax and TransUnion, and your reports for each may differ slightly. Not all creditors report to both bureaus, and each formats information differently. 

That's why we recommend checking both reports annually to catch errors that might appear in only one of them. Your rights allow you to request one free credit report per year from both bureaus.

Factors that Impact Your Credit Score

Here’s the thing: credit bureaus don’t offer a public formula about how they calculate your credit. However, lenders typically assess the following: 

• Payment history (35%): Late payments could negatively impact your score. Similarly, a long history of on-time payments boosts it. 
• Credit utilization ratio (30%): This ratio compares your account balances to limits. If you’re stretching every account to the max, your score could dip. 
• Credit mix (10%): Having diverse credit types, such as a car loan, mortgage, and credit cards, results in a slightly higher score than those with only one type of credit.
• Credit history length (15%): Do you only have a series of revolving credit accounts all under two years old? Longer credit history reports generally improve your credit score.
• Inquiries (10%): Multiple hard inquiries can worsen your score.

What to Do if You Find Errors on Your Credit Report 

Finding and fixing errors on your credit report can be frustrating, but you have the right to dispute them. Follow these steps to correct your credit report:

Step 1: Gather Your Evidence 

Collect documentation that proves the error, including bank statements, receipts, and correspondence with creditors. The more evidence you have, the stronger your case.

Step 2: Contact the Credit Bureau 

File a dispute directly with the bureau whose report contains the error. You can typically do this online, by phone, or by mail. Be specific and include copies of your supporting documents.

Both bureaus must investigate your dispute within 30 days. If they determine the information is incorrect, they'll update your report.

Step 3: Contact the Creditor 

While the credit bureau investigates, contact the creditor who reported the incorrect information. Explain the error and provide your evidence. They may be able to resolve it more quickly.

Step 4: Escalate if Necessary 

If the investigation doesn't resolve the error, you can escalate your complaint to the Financial Consumer Agency of Canada (FCAC) or your provincial consumer protection office.

Watch Out for Credit Repair Scams

Be cautious of companies that promise to "fix" your credit for a fee or claim they can remove accurate negative information. 

When to Seek Professional Help with Your Credit Report 

Understanding your credit report is important, and there’s help available if you have questions. The more informed you are about your personal credit score, the fewer challenges you might face when you seek credit. 

Consider seeking professional help if you’re overwhelmed and want your credit report explained, planning a major purchase, or feeling the weight of financial stress. 

Credit Canada’s certified Credit Counsellors offer free, confidential support to help you understand your credit report and develop an action plan to regain your financial control with confidence. Contact us online or call 1 (800) 267-2272 to get started.

Frequently Asked Questions

How often should I check my credit report for updates or changes?

Check your credit report for free at least once a year from both Equifax and TransUnion. If you're actively improving your credit, planning a major purchase, or concerned about identity theft, check every three to four months. 

What should I do if my credit report looks different from Equifax and TransUnion?

It's normal for reports to differ slightly since not all creditors report to both bureaus. Review both carefully and ensure information is accurate on each. If you spot an error, dispute it with that specific bureau.

Does paying off old debt immediately remove it from my credit report?

No, paying off debt updates the status to show a zero balance, which is positive, but the account history remains. If an account has missed or late payments, this negative information typically stays on your credit report for six to seven years, from the date of initial delinquency or the most recent recorded activity (such as a payment). 

How long does it take to rebuild credit after a negative mark?

Late payments may affect your score for months, while bankruptcy impacts your credit for six to seven years. Most people see noticeable improvement within 12-24 months of consistent changes. 

How should I build my credit as a newcomer to Canada?

When you first arrive in Canada, you typically won’t have a Canadian credit history, so you’ll need to establish one. Here’s how to get started:

• Apply for a starter or secured credit card
• Make small purchases and pay on time
• Keep your credit utilization at 30% or less
• Monitor your credit report regularly
• Take Credit Canada’s free e-learning program on building credit for newcomers

Can a credit counsellor help me understand or rebuild my credit report?

Absolutely. Credit Counsellors help you interpret your report, identify improvements, and create a personalized rebuilding plan. Credit Canada's certified Credit Counsellors offer these services free in confidential, judgment-free consultations.