Understanding Credit Ratings and debt problems

Understanding Your Credit Rating

What is a credit rating?

A credit rating is a judgment made by credit reporting agencies on our repayment habits. In fact, it is a way to determine what kind of risk we present to lenders (compared with other consumers). It’s actually quite simple: the more we pay our debts on time, the better our credit rating. In Canada, the major credit reporting agencies are Equifax and TransUnion.

Is my credit rating important?

Yes, it is very important. If you have a good credit rating, it means you have a good financial reputation. A good credit rating makes lending institutions more confident in your ability to repay a loan, which improves your chances of getting a loan – which is handy when you want to borrow large amounts of money to purchase a car or a house, for example.

It is a lot more difficult to find a lender that will give you a loan when you have a bad credit rating. Bad credit can also affect us in other situations, such as when trying to rent an apartment, for example.

Who can access my credit report?

  • A financial institution, before granting a loan
  • A store, before selling an item to you on credit
  • A landlord, before renting an apartment
  • An employer, before hiring you
  • You, to verify the information contained in your credit report.

What information will I find in my credit report?

  • Your name, address, and date of birth
  • Work experience (employer name, job title, length of employment, income)
  • Your credit situation: late payments, outstanding debts, debt payment history, available credit
  • Information on your public financial transactions (unpaid taxes, bankruptcies, judgments against you)
  • A list of the organizations or individuals who have requested information about your creditworthiness

How long does information remain on my credit report?

From 6 to 7 years

North American Standard Credit Ratings

R1 & R9 Credit Ratings

The most common ratings are “R” ratings. These are known as North American Standard Account Ratings and are the most frequently used. The “R” stands for ‘revolving credit’, indicating that the rating is for renewable credit such as credit cards.

The best rating that can be assigned to you is R1. Conversely, the worst rating is R9. Other rating indicators that can appear in your file are the “I” rating for installment debt, such as a car loan, or the “O” rating, which signifies an open line of credit.

Credit Score

The credit reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender.

Do you have more questions about the impact your debt has on your credit rating? Do not hesitate to contact Groupe Serpone. Our team will answer all your questions and offer creative solutions to help you recover your financial health.