Area of Law: Credit, Debt and Bankruptcy
Answer Number: 0285
What is a credit rating?Region: Ontario Answer Number: 0285
Equifax and TransUnion Canada, the two major credit reporting services in Canada, collect credit and debt information from banks, lenders, credit card companies, leasing firms, courts, and others. Credit bureaus do not report on your annual personal income, family income or how much you have in the bank — only your debt, available credit, and the public record (bankruptcies, court judgments, etc.). In Ontario, consumer credit reports are governed by the Consumer Reporting Act.
It is important to distinguish the difference between a credit report, a credit score and a credit rating.
Sometimes, lenders use credit ratings when providing credit reporting agencies with information about how and when you make your payments. Credit ratings are based on a scale from 1, which is the best rating and means you pay your bills within 30 days of the billing date, to 9, which is the poorest rating before becoming bankrupt.
A letter will also appear before the number, indicating the type of credit you are using. An “R’ before the number refers to revolving credit, such as a credit card, where you make regular payments in varying amounts, and you can borrow up to a credit limit. This is the most common type. The letter “O” before the number refers to open credit, such as a line of credit, and an “I” refers to installment credit, such as a car loan.
Each separate credit account you have will have a credit rating.
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