Credit History – FAQs

There are two agencies in Canada who keep track of everything you have ever done which is related to loan or credit products and they report a snapshot of this history (usually 6 or 7 years only) to their lender clients when requested to do so.

Your credit history includes essential info like your name and DOB, and also your employment and residence history. And most importantly it includes the various credit and loan products you have and your repayment history , balance owing and utilization of these products.

Along with the historical snapshot provided to lenders is a score the agency calculates which is in comparison to all other Canadians. The score can change and is a function of several important variables. The main two being your payment history and your credit utilization.

You are entitled to identify and remove any legitimate reporting errors from your personal credit history. Both Equifax Canada and Trans Union Canada provide investigation request processes.

That said, there is no reason to be ridiculous about it. Arguing about former addresses or employers from ten years ago is not going to impact your personal credit score today!

But some reporting errors can be very harmful or costly to your score. And such errors might impact you from qualifying for a mortgage or car loan or even a job offer!

Here are some errors which you should address:

• Collection accounts showing as unpaid or status unknown, when in fact they have been settled
  
• Liens showing as unpaid or status unknown, when in fact they have been settled. This often happens with CRA.
  
• Missing credit cards and other loan products. It is possible you have multiple profiles with the credit bureau. That is, more than one credit report. This often happens when your name is mispelled. 
  
• Your report shows late payments or balances owing which you know to be false.
  
• Mismatched date of birth or you changed your name and it is not showing on your credit report.

1. Keep your balances owing really low. Keep your utilization rate as low as possible. Ideally paying your balance in full each month BEFORE you are even sent a statement.
2. Accept all credit limit increases. This makes you seem stronger and also lowers your utilization rates.
3. You need more than one credit card in your personal credit report. Two or three items at least, ideally.
4. Never ever miss any payments. If you do, it may set your score back by 100 points and take you the better part of a year to rebuild it.
5. Use all your credit cards and lines of credit every six months – even if you don’t need to. Unused cards have little impact on your personal credit score – so let them out for exercise now and then.

It’s pretty easy to track your credit score these days⁠—perhaps through a paid subscription to Equifax Canada or Trans Union Canada, or through free offerings from your bank, or other entities such as Borrowell or Credit Karma.

But there is no consistency among these various sources. And none of these scores are the same score your lenders will see when they request a copy of your personal credit report.

In fact, there can be dramatic differences. Therefore, you should focus on best practices at all times.

Your credit report updates every day, as new information is provided to the credit bureaus. It is not batched up and processed once a week or once per month. It is therefore possible your score could change a little every day, in theory.

Each credit bureau will provide a free copy of your credit report (without your score) by snail mail upon request. You can also go online and get a complete view of your report by subscribing to their monitoring services and gaining one month of full access free at Equifax and for $4.95 at Trans Union.

Here is the Equifax free monitoring link.

Here is the Trans Union Canada Monitoring link

The credit bureaus use complex computer algorithms and there are predictive variables which factor into your score. For example, at Equifax they would say your score is based on:

35% Payment History
30% Utilization
15% History
10% New Credit
10% Credit Mix

You credit score is a number – a single number calculated as a result of many predictive variables including your payment history, your credit utilization and credit mix.

The number is from 300 to 900, which most Canadians falling in the range of 600 to 800. The higher your score, the more respected you are by lenders and the more likely you are to be offered the best terms on credit, mortgage and other loan products.

Your credit history is the entire story behind that single number. An accounting of all the pertinent information the credit bureau has about you which is fed into their algorithms and used to determine the score.

This is why you should review your whole credit history for accuracy at least once per year. As reporting errors may result in a negative impact to your credit score.

We often speak to people who want to know how much mortgage they qualify for, but they express extreme reluctance to allow a credit check. I thought you might appreciate a few pointers about credit inquiries for a mortgage.

No credit inquiry = no pre approval certificate.

One single credit inquiry – can be used every day for thirty days to thirty different lenders and it counts as one inquiry.

Two separate mortgage related inquiries in 45 days have the impact of a single inquiry on the score.

Any impact on the credit score is minor anyway. Sometimes there is no impact. If there is, it is typically around 5 to 8 points.

I do speak on credit matters at industry conferences…..

“Ross Taylor is unquestionably the preeminent credit repair mortgage broker in Canada today. Ross’s expertise can help everyone who has concerns about their credit in their search for mortgage financing. It’s not only expertise Ross brings to the table.

He has a genuine desire to help people get the best possible outcome and the patience to work with clients over the long haul and with complete honesty. If you have questions and concerns over your credit in your search for a mortgage just ASKROSS.”

Ron Butler, highly respected mortgage industry veteran and founder of Butler Mortgage

Unfortunately it sometimes happens that the proposal affects the spouse with great credit. We see this with joint debt – like a loan or line of credit. The remaining spouse is still on the hook for the payments, but the fact it was included in a CP will lower their credit score. We saw one recently where the score dropped from 799 to 575 after the spouse filed a consumer proposal.

To encourage the card issuers to increase limits over time, you actually want to use and pay your new cards quite vigorously. At the same time, keep the balance and your utilization rate low. This can be accomplished by making multiple payments of the balance in full each month.

Capital One are the best card issuer for people rebuilding their credit but they will NOT increase your limit when you request it. This is a decision THEY make when they feel you are good and ready…. hence the more you use the card responsibly, the more likely they will increase the limit.

Today is March 7 2022. I filed my consumer proposal in October 2016 and I paid it off in April 2019. When I check TransUnion my score is 713 but Equifax is so low at 568. Why is my record at Equifax so bad? When will the proposal fall off the credit report?

Mistakes should be removed as soon as you complete the proposal, but they rarely are removed by Equifax.

For you, on May 01 2022 Equifax is supposed to remove all the tradelines included in your proposal. It is unlikely they will do tha,t as you paid the CP early, but they are supposed to all go on that date.

And the absolute latest they would fall off is November 1 2022.

The rule is that the proposal falls off your report six years after you filed, or three years after you completed the proposal, whichever comes first.

I have always understood we have to wait for credit issuers to update their balances owing on their own schedule. Most do so on the statement issuance date of their credit card.

They won’t update the balances owing before that though as they have no way of knowing if the card was used again after the payment was made. This is why they wait for the statement balance. Wish it were otherwise.

This question was asked by a client who had successfully completed a consumer proposal. She had also retained us to remove all the reporting errors which resulted from the proposal.

We feel it is ESSENTIAL you apply for a new credit card. I think this one would be fine https://www.capitalone.ca/credit-cards/guaranteed-secured-mastercard2

You can apply online or by telephone.

The problem is if you have no active credit, then your score is wasting away and you need new credit to bring it back up. And in fact if you do not get new credit soon, eventually your score will become zero !

In time, ALL THE BAD STUFF will be gone from your credit reports. All that will be left is any credit active in the previous six years. So by then we want you to have a credit score greater than 750. Then you can do anything and go anywhere for a new mortgage or credit.

Yes you can, unless you have some other debts with the card issuer and those debts are going to be included in the proposal. In that case, the card issuer is going to close your card.

The safest way to do this is to put the card away during the 45 days your CP is being reviewed and approved. Once approved, then go ahead and keep using it. It will help your credit score from tanking so badly.

Most of the time you should be fine, however the card issuer can cancel your card anyway. If that happens it is typically for one of three reasons:

1) If you had other things with that card issuer which were included in the CP

2) If the card is from American Express

3) If the card issuer does a soft inquiry and decides they don’t like your credit history now

My client then asked what happens if you put a balance on that credit card after the Consumer Proposal is approved. and the bank does a soft check and decides they don’t like your credit history now ?

I answered it could go either way, but most of the time I see the bank allowing the card to remain open.

Nothing ventured, nothing gained though 🙂

The reason your score has not yet increased is because the credit bureau has not been provided updated payment information from the tradeline which you paid off in full.

Every card issuer reports on their own schedule. Not knowing your card issuers’ reporting cycles, that is why I estimate it could easily take six weeks, maybe longer, to update. If you have a mortgage pending with needs your score to increase first, please contact us and we can discuss escalating the process at the credit bureau for you.

Many clients feel this is an unnecessary step. Especially if their application is going to end up at their own bank!

Recently we had long standing TD Bank clients ask this question prior to us sending in an application to TD Bank.

Regarding the credit inquiry, every single bank, credit union and all other mortgage lenders would require a fresh credit report supporting a mortgage application, and TD Bank is no exception. This is the case whether or not the applicants have their credit products.

Although some of the banks also have an internal scoring/rating system totally separate from the credit scoring systems of Equifax Canada and Trans Union Canada. These internal systems are helpful for cases which require exceptions to policy, or which might be borderline. A strong internal score can make the difference.

By the way, when it comes to underwriting their mortgages TD Bank outsources this process to a third party (another mortgage lender) and that party does not have access to your detailed account information.

So yes, pulling a credit report is necessary and essential.