Credit Score, Credit Report
Credit Score - A current evaluation of your credit worthiness. The score can range from 300 to 900 in Canada and is calculated by either of our 2 credit reporting agencies. Equifax and Transunion each have their own scoring methodologies and structure behind the calculation of a credit score. The higher the score the lower the risk to the lender. A lower credit score will be translated to be a higher risk to a lender. Although each lender’s criteria will vary and the credit score is not the only benchmark used for determining credit worthiness. Below is a generalized credit score evaluation.
300-580 High risk, could be denied credit from premium lenders
581-650 Moderate risk, approved for credit from most lenders, expect a higher interest rate or an added premium on approved credit
651-710 Normal risk, approved for credit from premium lenders at normal interest rates
711-750 Low Risk, approved for credit at competitive interest rates
751 & up Desirable client, approved with aggressively low interest rates
Credit Report – A detailed and comprehensive report on your financial situation, current and historical. The credit report will contain the previous 7 years of open and closed accounts, payment history of each account, current address, current employer, number and name of credit inquiries, secured property and all information pertaining to your debt and credit history. Accounts, can include utilities, credit cards, loans, retailer accounts, cell phones and mortgages. Each account holder will report monthly on the promptness of payment. The “R” system is a North American standard of reporting by creditors. Each R value represents your responsibility level on paying back money you have borrowed.
R0: Too new to rate; approved but not used.
R1: Pays (or paid) within 30 days of payment due date or not over one payment past due.
R2: Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due.
R3: Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due.
R4: Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due.
R5: Account is at least 120 days overdue, but is not yet rated “9.”
R6: This rating does not exist.
R7: Making regular payments through a special arrangement to settle your debts (Consumer Proposal)
R8: Repossession (voluntary or involuntary return of merchandise).
R9: Bad debt; placed for collection; moved without giving a new address or (bankruptcy)
Special notes for consideration, Every time you apply for credit, a track is left on your credit report. Too many tracks, reduce your credit score. Multiple moves or changing jobs in a short period of time, ( 2 years or less) can be an indicator to lenders of instability and will leave a track on your credit score. Skipping or late payments, even one or two on your accounts will negatively affect your credit score Your credit score, your credit history is the indicator of your financial health. Learning to read and understand your credit score, continuously maintaining a healthy score is important to every Canadian.