A collection entry on your credit report, including medical collections, can severely lower your credit score and in many cases prevent you from obtaining a mortgage or auto loan.

Before we get into how to remove collections from your credit report, I want to go into detail about what a collection entry actually means, how badly it can hurt your credit score, and how long collections stay on your credit report if you don’t take any action.

When I was in college I got a cellphone with Sprint. The phone service didn’t work well so I switched to Verizon but forgot that I owed Sprint a payment.

Long story short, it ended up going to Sprint collections and showing up on my credit report. I went ahead and paid the collection because I thought that would also remove it from my credit report.

However, it wasn’t removed, it was just changed to “paid collection”. I followed these steps to get it removed

1. Request a Goodwill Adjustment from the collection agency

The first step is to mail the collection agency a “goodwill letter”.

This is basically a letter that explains your situation, such as you want to purchase a house but can’t because of the collection on your credit report, and you’re kindly asking that they remove the collection out of goodwill.

2. Dispute the Collection Using the Advanced Dispute Method

If the goodwill letter fails to get the debt collection removed from your credit report, the next thing you should try is the advanced dispute method.

For this method, you will need a current copy of your credit report. TransUnion will provide you with all your credit reports –plus they include your credit score for free.

Once you have your credit report, find the entry of the collection you want to be removed and verify every piece of information that is listed.

If you find anything that is inaccurate, note it. This method works because rather than simply disputing the entire entry, you are going to write an advanced dispute letter that lists especially what is inaccurate.

Check the following items on the collection entry for inaccuracies:

• Balance
• Account number
• Date opened / Date closed (check all dates)
• Account status (e.g., Closed)
• Payment status (e.g., Collection)
• Credit Limit
• High Balance
• Anything else that appears to be inaccurate

After you have noted the inaccuracies you found, use my advanced credit dispute letter templateto write your letter.

Using this letter, you will demand that each piece of information is corrected or that the collection be removed.

This makes it more difficult for the credit agencies to verify the collection and hopefully result in them simply removing the collection altogether.

3. Demand That the Collection Agency Validate the Debt

If you’re unable to find any inaccuracies on the collection entry on your credit report, next you should write the collection agency and demand that they validate the debt.

Under section 809 of The Fair Debt Collection Practices Act, collection agencies are required to validate debts they are attempting to collect if you request that they do so.

The rub here is that you only have 30 days to make the request after their initial contact. If they are unable to validate the debt, you can ask them to remove it from your credit report.

1. APPLY FOR A SECURED CREDIT CARD

If you’re building your credit score from scratch, you’ll likely need to start with a secured credit card. A secured card is backed by a cash deposit you make upfront; the deposit amount is usually the same as your credit limit.

You’ll use the card like any other credit card: Buy things, make a payment on or before the due date, incur interest if you don’t pay your balance in full. You’ll receive your deposit back when you close the account.

NerdWallet regularly reviews and ranks secured credit card options.

Secured credit cards aren’t meant to be used forever. The purpose of a secured card is to qualify for a card without a deposit.

Secured credit cards aren’t meant to be used forever. The purpose of a secured card is to build your credit enough to qualify for an unsecured card — a card without a deposit and with better benefits. Choose a secured card with a low annual fee and make sure it reports to all three credit bureaus, Equifax, Experian and TransUnion.

2. APPLY FOR A CREDIT-BUILDER LOAN OR A SECURED LOAN

A credit-builder loan is exactly what it sounds like — its sole purpose is to help people build credit.

Typically, the money you borrow is held by the lender in an account and not released to you until the loan is repaid. It’s a forced savings program of sorts, and your payments are reported to credit bureaus. These loans are most often offered by credit unions or community banks; at least one lender offers them online.

Another option: If you have money on deposit in a bank or credit union, see about a secured loan for credit-building. With these, the collateral is money in your account or certificate of deposit. The interest rate is typically a bit higher than the interest you’re earning on the account, but it may be significantly lower than your other options.

3. GET A CO-SIGNER

It’s also possible to get a loan or an unsecured credit card using a co-signer. But be sure that you and the co-signer understand that the co-signer is on the hook for the full amount owed if you don’t pay. (See “What You Need to Know About Co-Signing.”)

4. BECOME AN AUTHORIZED USER ON SOMEONE ELSE’S CREDIT CARD

A family member or significant other may be willing to add you as an authorized user on his or her card. Doing so adds that card’s payment history to your credit files, so you’ll want a primary user who has a long history of paying on time.

You don’t have to use — or even possess — the credit card at all in order to benefit from being an authorized user.

Find out whether the card issuer reports authorized user activity to the credit bureaus.

Ask the primary cardholder to find out whether the card issuer reports authorized user activity to the credit bureaus. That activity generally is reported, but you’ll want to make sure — otherwise, your credit-building efforts may be wasted.

You should come to an agreement on whether and how you’ll use the card before you’re added as an authorized user, and be prepared to pay your share if that’s the deal you strike.

5. GET CREDIT FOR THE BILLS YOU PAY

Rent-reporting services such as Rental Kharma and RentTrack take a bill you are already paying and put it on your credit report, helping to build a positive history of on-time payments. Not every credit score takes these payments into account, but some do, and that may be enough to get a loan or credit card that firmly establishes your credit history for all lenders.

Experian Boost offers a way to have your cell phone and utility bills reflected in your credit report with that credit bureau. Note that the effect is limited only to your credit report with Experian — and any credit scores calculated on it.

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.” 

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.

You can ask for a free copy of your credit report by mail. There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus. Full details on how to order credit reports are available online.

We often mention TransUnion Canada and Equifax Canada as the two credit bureaus to use to check your score. Today we’re going to dig deeper and detail the steps needed to access your score from either of these resources in a safe and efficient manner.

Here are the 5 steps you’ll need:

• Step 1: Choosing a Credit Bureau
• Step 2: Gathering Identification Pieces
• Step 3: Determining How to Receive your Report
• Step 4: Understanding your Credit Report 
• Step 5: Monitoring your Credit Score Monthly

Step 1: Choosing a Credit Bureau

Under Canadian law, you’re entitled to your credit report once per year at no cost. You have the option of receiving your report by either mail, in-person or online, which we’ll discuss further in Step 3. With two credit bureaus to choose from, which do you go with? The answer is actually, both.

Though most consumers don’t realize it, your credit score has minor changes from one credit bureau to the next. This is because every bureau, financial institution and lender use a different model to determine credit score. For example, TransUnion may weight payment history as 35% of your score whereas Equifax may weight it at 40% (these are hypothetical numbers). Knowing both scores will ensure there aren’t any unexpected surprises when you apply for a loan.

The best practice is to order each score 6 months apart. For example, you can apply for your report from Equifax Canada in January and your report from TransUnion Canada during the summer. This will allow you to monitor your spending habits and understand where your financial health stands.

Note: Equifax Canada refers to your credit report as “credit file disclosure”.  TransUnion Canada refers to your credit report as “consumer disclosure”.
Though it’s important to get your credit report from both bureaus, you shouldn’t turn to your lender to find out your score. Asking your bank, credit union or dealership to check your report for you can actually negatively affect your credit score.

We also suggest being mindful of websites and apps that claim to check your score without affecting it. There are some credible third party website out there, such as BankRate.com and Borrowell.com, but many of them are scams. Anytime an unauthorized website asks for additional personal information, such as your SIN number, it will show up on your credit report.

Step 2: Gathering Identification Pieces

There are two different processes depending on whether you’re accessing a free report or one you pay for.

FREE REPORT PROCESS

1. Download the Canadian Credit Report Request Form

2. Photocopy two pieces of government-issued ID — this can be any of the following documents:

• Driver’s license
• Health card
• Birth certificate
• Passport
• Bank statement or phone bill (only if your home address isn’t up to date on the above documents. Please black out confidential information)

3. Fill out the form with your contact information

4. *Optional Include your SIN number on the form. This step is optional, however, if you’re requesting a report from a reputable source, such as TransUnion Canada or Equifax Canada, we suggest it. Providing your SIN helps speed up the cross-reference check the credit bureau performs, meaning you’ll receive your report quicker.

5. Send in your completed form and proof of identity in a well-sealed envelope by mail or by fax to the provided address.

You should receive your report within 5 – 10 days!

Your credit scores are an important aspect of your financial profile.

They may be used to determine some of the most important financial factors in your life, such as whether or not you’ll be able to lease a vehicle, qualify for a mortgage or even land that cool new job.

And considering 71 percent of Canadian families carry debt in some form (think mortgages, car loans, lines of credit, personal loans or student debt), good credit health should be a part of your current and future plans.

High, low, positive, negative – there’s more to your scores than you might think. And depending on where your numbers fall, your lending and credit options will vary. So what is a good credit score? What about a great one? Let’s take a look at the numbers.

How your credit scores are set

Canadian credit scores are officially calculated by two major credit bureaus: Equifax and TransUnion.

They use the information in your credit file to calculate your scores. Factors that are used to calculate your scores include your payment history, how much debt you have and how long you’ve been using credit.

Pro Tip: You can view sample credit scores summaries from each bureau (see Equifax here and TransUnion here) to get a sense of what to expect.

What’s in a number?

In Canada, your credit scores generally range from 300 to 900. The higher the score, the better. High scores may indicate that you’re less likely to default on your repayments if you take out a loan.

Below you’ll see a general breakdown of credit score ranges and what each range means in terms of your general ability to qualify for lending or credit requests, such as a loan or mortgage.

Note that the ranges can vary slightly depending on the provider, but these are the credit score ranges you’ll see on Credit Karma. The best way to know where your scores stand is to check your credit report:

● 800 to 900: Congratulations! You have excellent credit. Keep reaching for the stars.

● 720 to 799: You have very good credit! You should expect to have a variety of credit choices to choose from, so continue your healthy financial habits.

● 650 to 719: This is considered good to lenders. You may not qualify for the lowest interest rates available, but keep your credit history strong to help build your credit health.

● 600 to 649: This is fair credit. History of debt repayment will be important to demonstrate your solid sense of financial responsibility.

● 300 to 599: Your credit needs some work. Keep reading for some improvement suggestions below.

How to go from good to great (or bad to good)

To borrow from Leo Tolstoy, all great credit scores are alike, but all bad credit scores are bad in their own way. That is, ideal credit scores are built on a similar set of healthy financial habits, but your scores can be damaged by any number of factors. There are many different issues that can hurt your credit, such as:

● Late or missed payments.
● Too many (or too few) open credit accounts.
● High credit card balances.
● High balances on loans.
● Too many credit applications.

The first step toward improving your credit health is avoiding getting trapped in the highs and lows of managing your credit.

Heather Battison, vice president of TransUnion Canada explains how consistency is key: “The most important factor for building and maintaining your scores is to pay your bills on time and in full each month. This activity demonstrates your ability to responsibly manage credit and can positively impact your credit scores.”

It’s also key to remember that your payment history isn’t just about paying your credit card bill. “It also includes things like your cellphone bill,” says Trevor Gillis, associate vice president of account management at TD Credit Cards.

Gillis says building good credit scores is “based on using your credit card responsibly, which means making at least the required monthly minimum payment (if you can’t pay off the balance in full), making your payments by the payment due date and keeping your credit card utilization low.”

Beware of third-party companies that claim they can quickly boost your scores. According to the Office of Consumer Affairs, only your creditors are able to alter the information on your credit file. When it comes to building good credit, there are no shortcuts.

Here’s the good-to-great news: Improving your credit health isn’t only achievable, but also the steps involved can help you establish an overall healthy financial life. Read our tips for everyday ways you can improve your credit health.

Everyone who’s ever borrowed money to buy a car or a house or applied for a credit card or any other personal loan has a credit file.

Because we love to borrow money, that means almost every adult Canadian has a credit file. More than 21 million of us have credit reports. And most of us have no idea what’s in them.

Are there mistakes? Have you been denied credit and don’t know why? Is someone trying to steal your identity? A simple check of your credit report will probably answer all those questions. And it’s free for the asking.

So what’s in a credit report?

You may be surprised by the amount of personal financial data in your credit report. It contains information about every loan you’ve taken out in the last six years — whether you regularly pay on time, how much you owe, what your credit limit is on each account and a list of authorized credit grantors who have accessed your file.

Each of the accounts includes a notation that includes a letter and a number. The letter “R” refers to a revolving debt, while the letter “I” stands for an instalment account. The numbers go from 0 (too new to rate) to 9 (bad debt or placed for collection or bankruptcy.) For a revolving account, an R1 rating is the notation to have. That means you pay your bills within 30 days, or “as agreed.”

Any company that’s thinking of granting you credit or providing you with a service that involves you receiving something before you pay for it (like phone service or a rental apartment) can get a copy of your credit report. Needless to say, they want to see lots of “Paid as agreed” notations in your file. And your credit report has a long history. Credit information (good and bad) remains on file for at least six years.

What’s a credit score? And why is it so important?

A credit rating or score (also called a Beacon or a FICO score) is not part of a regular credit report. Basically, it’s a mathematical formula that translates the data in the credit report into a three-digit number that lenders use to make credit decisions. 

The numbers go from 300 to 900. The higher the number, the better. For example, a number of 750 to 799 is shared by 27 per cent of the population. Statistics show that only two per cent of the borrowers in this category will default on a loan or go bankrupt in the next two years. That means that anyone with this score is very likely to get that loan or mortgage they’ve applied for.

What are the cutoff points? TransUnion says someone with a credit score below 650 may have trouble receiving new credit. Some mortgage lenders will want to see a minimum score of 680 to get the best interest rate.    

The exact formula bureaus use to calculate credit scores is secret. Paying bills on time is clearly the key factor. But because lenders don’t make any money off you if you pay your bills in full each month, people who carry a balance month-to-month (but who pay their minimum monthly balances on time) can be given a higher score than people who pay their amount due in full. 

This isn’t too surprising when you realize that credit bureaus are primarily funded by banks, lenders, and businesses, not by consumers.

If you’re one of the 250,000 people who immigrated to Canada this year, welcome! Aside from acclimating yourself to a new country, home, and job, you’ll also quickly realize the benefits of building a credit history with a strong credit score.

Whether you’re looking to lease a car, buy a home, get a cell phone, or get a credit card, your going to want to start building a credit history right away to get access to lending products at the best rates available. Here are a few tips to help you get started:

1. Apply for an unsecured credit card: Apply for a Canadian credit card as soon as possible. Many of the big banks offer new immigrants a credit card with a low line of credit as part of their initial banking package, such as Royal Bank’s “Welcome to Canada” package or Scotia’s “Start Right” program.  Once you get your credit card, start using it right away.
2. Apply for a secured credit card if need be.  A secured credit card requires you to put money on deposit with the credit card issuer as collateral in the event you default on your credit card balance. Not every person will be eligible for an unsecured credit card without a credit history, this is especially true of older adults. Also, if you’re looking for a credit card with a larger line of credit, you’re best bet may be a secured credit card. The advantage of using a secured credit card, over a debit card, is that your repayment habits will be reported to the credit bureaus, allowing you to build that all important credit history. We highly recommend to evaluate Refresh Financial Secured credit card, as they specialize in products customized to fit the needs of the newly-arrived consumer, and can also offer a loan to start building credit safely.
3. Apply for a mobile phone. Some phone carriers, like Telus, specifically state that no credit history is required to get an account, and that they will report your post-paid subscription to the credit bureaus. While you may be tempted to get a pre-paid plan, a post-paid plan will help you build a credit history.
4. Pay your credit card bill on time. Whether paying the minimum or more, make your credit card bill payments on or before the due date. 35% of your credit score is based on payment history. If you’re late, even by an hour, your credit history will be negatively impacted. Paying on time does not mean paying your entire balance. Paying on time means paying at least the monthly minimum payment, which is shown on your credit card statement. Understand how long you have after receiving your credit card bill to make your payment, called your grace period. It’s usually around 21 days. To help you pay on time, you can set-up automatic monthly payments through your bank account.
5. Pay off your balance in full each month. While carrying a balance and making your payments on time will help your credit history more than paying in full each month, we would never recommend carrying a balance just to build your score. Using your credit card and paying it off every month will help build your credit score as well, just not as fast. But it’s a better strategy than paying excessive interest charges just to build a credit history.
6. Get different types of credit. The credit bureaus love people with different sources of credit. So if you can manage to get a credit card, cell phone, or car loan (usually with a large deposit), it will help you build a credit history with a strong score that much faster.

Financial institutions will usually start using your credit history after it’s been established in good standing for a period of 18 months. But several other factors will be considered as well, including your savings history, net worth, income and ability to provide a security deposit, such as a down payment on a mortgage. These strategies should go a long way towards establishing a Canadian credit history for new immigrants.

Your credit scores are an important aspect of your financial profile.

They may be used to determine some of the most important financial factors in your life, such as whether or not you’ll be able to lease a vehicle, qualify for a mortgage or even land that cool new job.

And considering 71 percent of Canadian families carry debt in some form (think mortgages, car loans, lines of credit, personal loans or student debt), good credit health should be a part of your current and future plans.

High, low, positive, negative – there’s more to your scores than you might think. And depending on where your numbers fall, your lending and credit options will vary. So what is a good credit score? What about a great one? Let’s take a look at the numbers.

How your credit scores are set

Canadian credit scores are officially calculated by two major credit bureaus: Equifax and TransUnion.

They use the information in your credit file to calculate your scores. Factors that are used to calculate your scores include your payment history, how much debt you have and how long you’ve been using credit.

Pro Tip: You can view sample credit scores summaries from each bureau (see Equifax here and TransUnion here) to get a sense of what to expect.

What’s in a number?

In Canada, your credit scores generally range from 300 to 900. The higher the score, the better. High scores may indicate that you’re less likely to default on your repayments if you take out a loan.

Below you’ll see a general breakdown of credit score ranges and what each range means in terms of your general ability to qualify for lending or credit requests, such as a loan or mortgage.

Note that the ranges can vary slightly depending on the provider, but these are the credit score ranges you’ll see on Credit Karma. The best way to know where your scores stand is to check your credit report:

● 800 to 900: Congratulations! You have excellent credit. Keep reaching for the stars.

● 720 to 799: You have very good credit! You should expect to have a variety of credit choices to choose from, so continue your healthy financial habits.

● 650 to 719: This is considered good to lenders. You may not qualify for the lowest interest rates available, but keep your credit history strong to help build your credit health.

● 600 to 649: This is fair credit. History of debt repayment will be important to demonstrate your solid sense of financial responsibility.

● 300 to 599: Your credit needs some work. Keep reading for some improvement suggestions below.

How to go from good to great (or bad to good)

To borrow from Leo Tolstoy, all great credit scores are alike, but all bad credit scores are bad in their own way. That is, ideal credit scores are built on a similar set of healthy financial habits, but your scores can be damaged by any number of factors. There are many different issues that can hurt your credit, such as:

● Late or missed payments.
● Too many (or too few) open credit accounts.
● High credit card balances.
● High balances on loans.
● Too many credit applications.

The first step toward improving your credit health is avoiding getting trapped in the highs and lows of managing your credit.

Heather Battison, vice president of TransUnion Canada explains how consistency is key: “The most important factor for building and maintaining your scores is to pay your bills on time and in full each month. This activity demonstrates your ability to responsibly manage credit and can positively impact your credit scores.”

We begin by asking which credit reporting company is best overall. Is it Experian, Equifax, or Transunion that comes out on top? The answer depends on your perspective. Lenders and consumers have vastly different definitions of quality.

We chose to define best (highest quality) as the credit bureau most closely meeting the standards of accuracy, the speed of updates, ease of dispute handling, and data security.

Most Truthful

The credit bureau that provides the most accurate report is the one closest to being free from error or defect; consistent with a standard; or faithfully representing or describing the truth.

A common courtroom oath provides an outline for balancing precision.

1. The truth – is the information displayed on the report free from error?
2. The whole truth – does everything about a consumer appear in the report?
3. Nothing but the truth – does every item on the report belong to that person?

Lenders and consumers view the accuracy and quality issue very differently.

1. Lenders choose what bureau to use based primarily on the amount of negative information gathered and presented that could pertain to an applicant. Banks and lenders are predisposed to avoid large losses via default. This factor varies most by geography.
2. Consumers view the accuracy issue differently. They want incorrect negative marks removed quickly (faster updates) through a convenient process (easiest disputes). Consumers are predisposed to avoid rejection.

Most Secure

The credit bureau that properly safeguards the sensitive financial data of hundreds of millions of consumers is most secure. A data breach could expose the entire country to identity theft risks.

Equifax was hacked sometime during 2017. In September of that year, they announced that a security breach might have compromised the social security numbers, birth dates, and other personal information of about 143 million U.S. consumers.

Does this mean that Experian and TransUnion are better with their data security? We do not know. We simply know that the hackers penetrated the Equifax network first.

How long good credit information stays on your credit report

The good news is, good credit stays on your report for much longer than bad credit does. Any credit account that was paid off on-time and is in good-standing will stay on your report for upwards of 20 years. 
Sometimes, people believe it’s bad to have past credit history on your account for a long period of time. This isn’t the case. Rather, this is exactly the type of information you do want on your account as it shows a lender you have lots of financial experience and are responsible to manage a loan. A long, positive and on-going credit history is what you should strive for on your credit report.

What type of credit information shows up on your credit report

Whether good or bad, your credit report contains a large amount of information about your past spending and repayment habits. The two credit bureaus in Canada, Equifax Canada and TransUnion Canada, have access to this information and use it to determine your creditworthiness — or your credit score.
Here’s the information that shows up on your report:

1. Credit transactions: credit cards and lines of credit
2. Secured loans: mortgages, car leases or personal loans
3. Bank accounts: closed chequing and savings accounts
4. Legal judgements: lawsuits or court rulings
5. Debt collection: if sent to a collection agency
6. Credit inquiries: read our post How Do Credit Checks Impact Your Credit Score to learn more
7. Registered items: a form of security interest granted over an item of property
8. Consumer proposals: the legal agreement between you and a lender

If you’re one of the 250,000 people who immigrated to Canada this year, welcome! Aside from acclimating yourself to a new country, home, and job, you’ll also quickly realize the benefits of building a credit history with a strong credit score.

Whether you’re looking to lease a car, buy a home, get a cell phone, or get a credit card, your going to want to start building a credit history right away to get access to lending products at the best rates available. Here are a few tips to help you get started:

1. Apply for an unsecured credit card: Apply for a Canadian credit card as soon as possible. Many of the big banks offer new immigrants a credit card with a low line of credit as part of their initial banking package, such as Royal Bank’s “Welcome to Canada” package or Scotia’s “Start Right” program.  Once you get your credit card, start using it right away.
2. Apply for a secured credit card if need be.  A secured credit card requires you to put money on deposit with the credit card issuer as collateral in the event you default on your credit card balance. Not every person will be eligible for an unsecured credit card without a credit history, this is especially true of older adults. Also, if you’re looking for a credit card with a larger line of credit, you’re best bet may be a secured credit card. The advantage of using a secured credit card, over a debit card, is that your repayment habits will be reported to the credit bureaus, allowing you to build that all important credit history. We highly recommend to evaluate Refresh Financial Secured credit card, as they specialize in products customized to fit the needs of the newly-arrived consumer, and can also offer a loan to start building credit safely.
3. Apply for a mobile phone. Some phone carriers, like Telus, specifically state that no credit history is required to get an account, and that they will report your post-paid subscription to the credit bureaus. While you may be tempted to get a pre-paid plan, a post-paid plan will help you build a credit history.
4. Pay your credit card bill on time. Whether paying the minimum or more, make your credit card bill payments on or before the due date. 35% of your credit score is based on payment history. If you’re late, even by an hour, your credit history will be negatively impacted. Paying on time does not mean paying your entire balance. Paying on time means paying at least the monthly minimum payment, which is shown on your credit card statement. Understand how long you have after receiving your credit card bill to make your payment, called your grace period. It’s usually around 21 days. To help you pay on time, you can set-up automatic monthly payments through your bank account.
5. Pay off your balance in full each month. While carrying a balance and making your payments on time will help your credit history more than paying in full each month, we would never recommend carrying a balance just to build your score. Using your credit card and paying it off every month will help build your credit score as well, just not as fast. But it’s a better strategy than paying excessive interest charges just to build a credit history.