Understanding your credit report

Credit Report: What It Means and How to Read it



Taking a loan or using a credit card or anything like buy now pay later, will have a credit history. If you don’t have money to pay for something even a car or a house mortgage, you look for a long term credit.

Whenever a financial institution, such as a Bank, Credit card Company or any other business gives you a credit, it will send information about your payments on time to credit reporting agency. Credit reporting agencies known as credit Bureaus are business that collect information about you and how long it takes you to pay back money you have borrowed. This information is called “Credit history”.

If you borrow money in future, the lender will check with credit reporting agency to see if you have good credit.

They want to know if you can be trusted in making payments according to the agreed upon terms of the loan.  Having a good credit history, that includes making timely payments, may help increase your chances of being approved by the mortgage lender.  The same is true for an apartment; the landlord may review your credit history to learn about how well you make payments or other credit you may have.  If your history is poor you could be denied the apartment.

Your credit report in Canada is like your 3rd grade report card, but instead of giving you a gold star to denote your excellent Play Dough-playing ability—it shows how fiscally responsible you’ve been. And it lasts a lot longer than one school year.

Every transaction and payment (or lack thereof) you make is recorded by one of Canada’s three credit bureaus: Equifax Canada, TransUnion Canada and Northern Credit Bureaus Inc.. Equifax and TransUnion are the most common.

How to Read your Credit Report
Reading your credit report can be difficult as to many it looks like German, or algebra….or German algebra. But, to understand it you simply need to know their rating system.

Credit-reporting agencies use a rating system consisting primarily of two components—a letter then a number.

Credit Report: What the Letter Means

The letter refers to the type of credit you use.

  • “I” stands for instalment loans, which are loans where you repay a loan in fixed payments for a fixed amount of time. The most common use of instalment loans is car loans.
  • “O” means an ‘open’ source of credit. These are open-ended or flexible loans and includes lines of credit—which allow you to borrow money as needed (up to a certain amount). Student loans also fall into this category.
  • An “R” is revolving credit—which is the most common kind of credit as it encompasses credit cards.

By putting the letter and a number together they are simply telling you what type of credit is on your report and how well you are doing. So, for example if you have “O2” it means you’re paying your student loans payment almost always on time. An “O9” would mean you have failed to pay your loans back thus far. If you had an “R5” it would mean that you have one or more credit cards  that have a payment overdue for more than 120 days.


Building a credit history

It is important to have a credit history. If you don’t have a credit history, you can begin building one by using a credit card – as long as you use the credit card wisely.

How can you improve your credit score?

Here are some tips on how to improve your credit score:


  • Pay your bills on time.
  • Try to pay your bills in full by the due date. If you aren’t able to do this, pay at least the minimum amount shown on your monthly statement. Contact your creditors if you are having trouble making payments.
  • Make sure that your monthly account statement is correct. Read the statements and other material you receive from your credit card company carefully. Keep up to date on any fee increases or changes in your card’s terms and conditions.


  • Don’t accept or use any form of credit until you understand and are comfortable with its terms and conditions, to avoid any misunderstandings between you and the credit issuer.
  • Don’t wait to report any unauthorized transactions on your account. Contact your credit issuer immediately if your bill includes items you did not buy.
  • Don’t go over the credit limit on your credit card.

Still Need Help?

If you still need on how to read your credit report, help determining what your credit report means to your financial stability—or you need some guidance on improving the rating, simply give us a call here at   www.ClearDebtSolutions.com . We can help.

Leave a Reply