Cleaning up your credit Part III - what's on your credit report?

Part three in this series, today I'll detail what's in your credit report and what's not.

What you'll find in your credit report:

• Personal details pertaining to your employment, address, etc. Basically, information that you gave to previous lenders.
• A detailed list of your current credit including loans, credit cards, etc. This information is on your report for 6 years, so even if you've closed accounts, the information will still be seen.
• Each debt will show the maximum limit and the current or last reported balance (most creditors today report monthly).
• If you've been late on your accounts. Reports will show if and how many times you've been 30, 60 or 90 days late. These obviously hurt one's score.
• If you're over limit on your account, if it's in default, paid in full, etc.
• Collections - if you've had an account go in to default and it's been forwarded to a collection agency of the creditor's collections department, this will show in a section of your report.
• Banking information may or may not show on your report.
• Public records and other information such as a bankruptcy or judgment against you.

Credit inquiries:

• An inquiry made by a creditor will automatically purge three years from the date of the inquiry. The system will keep a minimum of five inquiries.
• These inquiries are also referred to as "hits" on your report and can bring down your score temporally. There are "hard" and "soft" hits or inquiries on your report. For example, if you specifically apply for credit of some type, the lender will pull your report and thus a hit/inquiry will be registered on your report. If you do this with several lenders in a short period of time, the reason this can pull your score down is that it appears that you're "seeking" credit which can be a red flag to lenders that you're "in need". I think it was Mark Twain that so accurately and eloquently stated many years ago, "A banker is there to lend you an umbrella when it's sunny and there to take it away when it's raining". Imagine that a lender, of course, doesn't want the risk of lending to anyone who is desperate. They only want strong candidates. You might have innocently been shopping around for a new car or mortgage. However, those "hits" raise more questions for the last lender, such as, why didn't you get approved the first few times? Were you declined with the first few lenders and therefore, they don't want to extend credit? It's only one factor in pulling down your score, but it is notable that one should not seek credit in a short period of time with many lenders. If you are seeking the best rate on a loan or don't know for sure if you'd be approved with a lender, pull your report yourself and bring it in with you. If the lender approves you, they'll still need to pull your report and register a "hit", however, if you weren't going to stand a chance of being approved, they'll generally let you know and you'll save having another inquiry on your report for nothing, possibly pulling down your score further.
• Soft hits or inquiries on your report will show, but do not affect your score. These are hits from you pulling your own report or existing creditors taking a peek at your report to see if they'd like to perhaps increase your limit, etc. If you read in the fine print when you accept a loan or credit card, you'll see that the lender asks permission to periodically check your credit. These are your soft hits/inquiries.

What's not on your report:

• In Canada, generally, your mortgage is not on your credit report. This is shocking to many Americans as it's absolutely on their report and they wonder how we build our credit standing without our largest debt being reported. There may be instances where your mortgage could be reported (I haven't seen them personally) such as a second mortgage with a non Schedule One bank (i.e. the big five) or if it's structured as a secured line of credit, etc. Again, I haven't seen this with any of my case studies, but check your personal report to verify. Generally speaking, if you have a conventional mortgage, it will not show on your report. Therefore, if you've always been diligent in paying your mortgage payments on time but have been a little lax with your credit card minimum's and loan repayments, you might find your score less than favourable without your good mortgage payments to offset it.
• Utilities also, depending on the province and type (cell phone bills might show up), are not on your report. However, if you don't pay your cable bill for example and it goes into collections (for so many people this amount is less than $50), this could show up in the collections section of your report and will dramatically pull down your score.

If you order the full enchilada as I recommended in previous posts from either Equifax Canada or TransUnion Canada, you'll find the reports are quite detailed, well laid out and easy to read.

Plus, if there's something on your report that is wrong or shouldn't be there at all, both agencies have dispute resolution instructions on their site.

If you have any questions about interpreting your report, please feel free to leave me a post.