4 min read

What are credit reports

Written By

Clay Shiffman

Credit reports are comprehensive documents detailing an individual's financial history. It provides lenders with a snapshot of your creditworthiness, helping you qualify for financial opportunities like a credit card, mortgage, personal loan, or line of credit.

Your credit report is a vital tool for lenders to assess the risk of lending your credit. It includes valuable financial information about your credit activity. Understanding your credit report and proactively managing it can make you more favourable with lenders and increase your financing abilities in the future.

Understanding credit reports

A credit report is an ongoing documentation with important financial information on individuals. It includes your credit accounts, payment history, outstanding debts, and inquiries made by lenders. Credit bureaus and credit reporting agencies compile data when credit card companies report your activity and create a report detailing your financial history. Based on the credit report, individuals receive a three-digit credit score.

You can grant credit report authorization to companies and individuals to access your credit report. Lenders, like credit card companies, review your credit report when you apply for credit. Credit reports indicate an individual's creditworthiness, including their risk as borrowers. Lenders like to see applicants with strong credit reports, as it shows financial responsibility and stability to manage current and additional debt.

By examining their credit report, individuals can assess their financial health, identify errors or discrepancies, and take steps to improve their credit scores. A higher credit score makes it easier for you to qualify for credit, loans, or mortgages.

What's included in your credit report?

Credit reports typically contain various information to provide an overview of your credit history and financial behaviour. Here's what a typical credit report includes:

  • Personal information, including your name, current and previous addresses, date of birth, Social Insurance Number, and employment information.

  • Details about your credit accounts, such as credit cards, mortgages, and lines of credit.

  • Information about the opening date, credit limit or loan amount, current balance, payment history, and account status of your various credit accounts.

  • A record of your payment history for each credit account showing whether payments are on time, late, or missed.

  • A list of companies and individuals who have accessed your credit report within a specified period.

  • Information from public records, such as bankruptcies, tax liens, and civil judgments.

  • Accounts that have been turned over to collection agencies due to non-payment.

  • The ratio of y our credit card balances to your credit limits.

Review your credit report periodically to ensure the information is updated and accurate. Errors and discrepancies can impact your credit report, lowering your credit score and chances of qualifying for credit.

Credit reports and credit scores

Credit reports and credit scores are closely related but serve different purposes for financial institutions, credit bureaus, and individuals. A credit report is a detailed record of an individual's credit history compiled by the main credit bureaus. It contains information about your debt, credit inquiries, public records, and other financial data. Credit reports provide a comprehensive view of a person's financial behaviour.

A credit score is a numerical representation of an individual's creditworthiness based on information on the credit report. It serves as a quick reference for lenders to gauge the risk of lending money to an individual. Credit bureaus take information from your credit report and provide a three-digit number ranging from 300 to 900 based on their credit scoring models.

While credit reports provide detailed information, credit scores are a simpler way for lenders to evaluate credit risk. Your credit report and credit score can change based on your credit activity.

For example, applying for new credit results in a hard credit inquiry, which can show up on your credit report and lower your score.

How does information get on my credit report?

Here's how information typically gets onto your credit report:

  • Creditors report information on your credit accounts to the credit bureaus, such as new accounts, account opening dates, credit limits, loan amounts, payment history, current balances, and account statuses.

  • Your payment history on credit accounts is regularly reported as on time, missed, or defaulted.

  • Certain financial events, like bankruptcies, are matters of public record and can appear on your credit report.

  • Collection agencies may report account collections to the credit reports.

Not all creditors report information to all three major credit bureaus, and your report may vary slightly. Credit reports from credit reporting agencies or financial institutions may also differ from credit bureaus, as they may not receive the same type of information.

What is a consumer reporting agency or credit bureau?

A consumer reporting agency, commonly known as a credit bureau, is an institution that collects and maintains consumer credit information. Credit bureaus gather information from various sources, including lenders, creditors, public records, and other businesses, and compile the data into a credit report for individual consumers.

The three major credit bureaus in Canada are Equifax Canada, TransUnion Canada, and Experian. Consumers can request a free copy of their credit report from each bureau annually. You can also get a free credit score from your financial institution, creditor, or lender throughout the year to monitor your financial information.

What is the Federal Consumer Agency of Canada?

The Federal Consumer Agency of Canada (FCAC) is a consumer protection bureau in Canada. They regulate and enforce laws governing the financial industry and provide financial consumer education. The FCAC develops policies and initiatives that promote fair marketplace practices and provide tools and resources to help Canadian consumers make informed decisions. It collaborates with other government agencies, industry stakeholders, and consumer advocacy groups to address emerging consumer issues to ensure a competitive and fair marketplace.

How long does information stay on your credit report?

The length of time information stays on your credit report varies depending on the type of information. Hard credit inquiries from credit applications typically remain on your credit report for up to two years but may only affect your credit score for the first year.

Positive information, such as accounts in good standing and on-time payments, stays in your report indefinitely. This information can demonstrate your creditworthiness over time and can have a positive impact on your credit score.

Negative information stays on your credit report depending on the type of information:

  • Late payments typically stay on your credit report for up to seven years from the late payment date.

  • Collection accounts can stay on your report for up to seven years from the date of the delinquency.

  • Bankruptcies can remain on your credit report for up to ten years from the filing date.

  • Foreclosures can stay on your record for up to seven years from the foreclosure date.

  • Public record information can stay on your report for up to seven years from the filing date.

What is a credit report inquiry?

A credit report inquiry refers to a record of when a third party accesses your credit report. When you apply for credit, such as a credit card or loan, the lender or creditor typically requests a copy of your credit report from one of the major credit bureaus.

A hard inquiry occurs when a potential lender or creditor checks your credit report as part of the application process for a new credit account. Hard inquiries can result from your actions, such as applying for more credit or requesting a credit limit increase. Hard inquiries are visible to other creditors and may impact your credit score temporarily. Too many hard inquiries within a short period can signal to lenders that you may be taking on too much debt to manage effectively.

A soft credit inquiry happens when you or a third party checks your credit report for non-credit purposes, such as when you request free credit reports to monitor your score or when a company performs a background check. Soft inquiries don't impact your credit score and are only visible to you.

Who can see your credit report?

Your credit report contains sensitive financial information, so access to it is regulated to protect consumer privacy. Only certain entities with a legitimate reason to access your report can see the information, including:

  • Lenders and creditors to assess applications for credit cards, loans, and mortgages.

  • Landlords and property managers are responsible for the rental application process to evaluate your financial stability and ability to pay on time.

  • Insurance companies for when you apply for insurance, like auto or homeowner's insurance.

  • Employers as part of a background check, typically for roles involving financial responsibilities or access to sensitive information.

  • Government agencies to verify eligibility for government benefits, investigate financial crimes, or conduct other orders.

  • You can access a copy of your report at any time.

  • Creditors with whom you already have accounts as a part of account management processes.

Other accounts included in a credit report

In addition to traditional credit accounts, other accounts may also appear on your report. These accounts provide lenders with a more comprehensive view of your financial behaviour and creditworthiness:

  • Retail accounts like store credit cards or lines of credit.

  • Utilities and telecommunications accounts

  • Rent payments

  • Medical bills

  • Student loans

  • Tax liens

  • Judgments

These additional accounts and activities provide a more detailed picture of your financial situation. They can also contribute to your credit score and help you build your credit, especially if you have a limited or no credit history.

How to check your KOHO credit report

Monitoring your credit report ensures you stay on track of your credit-building journey. You can review your credit report regularly throughout the year to check for errors, discrepancies, negative remarks, and changes.

Your credit report contains payment history on your physical and virtual credit card and secured lines of credit. Consistent on-time payments and low credit utilization rates improve your score over time, making it easier to qualify for additional credit and better interest rates and terms. You can also apply for overdraft protection coverage so you don't get penalties for exceeding your credit limit.

Regardless of where you are in your financial journey, KOHO provides expert advice, tools, and products to help maximize your money's value. Learn more about how you can earn interest and build your credit with KOHO.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!